www.nisshinbo.co.jp/english/

Nisshinbo Holdings Inc.
2-31-11, Ningyo-cho, Nihonbashi,
Chuo-ku, Tokyo 103-8650, JAPANTEL +81-3-5695-8833 FAX +81-3-5695-8970

Printed in Japan

Annual Report 2012 Fiscal Year Ended March 2012

Summary

Financial Highlights

Under the Challenge 2012 Three-Year Management Plan, launched in April 2010, we are pushing ahead

For the years ended March 31

with bold management reforms that will take Nisshinbo in a new direction. We are targeting net sales of

2009

2010

2011

2012

2012

Net Sales¥322,412¥286,167¥242,409¥325,555¥379,340$4,741,750

Textiles

76,09464,39253,222

57,40060,964762,050

Automobile Brakes

59,812

49,23041,046

46,11947,450593,125

Papers33,54734,214

31,53630,32630,220377,750

Precision Instruments

34,02135,602

24,90832,02025,191

314,888

Chemicals

9,582

8,059

6,309

7,284

8,258

103,225

Electronics

76,47560,54951,699112,820

169,9072,123,837

Real Estate

5,010

6,011

6,298

12,437

9,082

113,525

Other Businesses

27,871

28,11027,391

27,14928,268353,350

Operating Income

12,034408

3,570

19,843

4,170

52,125

12,290(1,286)

1,896

11,185

9,416

117,700

Total Assets¥424,706¥366,858¥358,110¥479,852¥534,584$6,682,300

Equity245,909

193,698

193,639

211,557

213,751

2,671,888

Net Cash Provided by Operating Activities¥24,779¥11,939¥27,538¥16,529¥12,974$162,175

Net Cash Provided by (Used in) Investing Activities(19,147)(14,393)(9,949)11,591(57,861)(723,263)

Net Cash Provided by (Used in) Financing Activities(8,829)11,940(30,347)703

16,835

210,438(yen)(dollars)

Operating Resultsresources into environmental and energy businesses.
In November 2011, we acquired TMD Friction Group S.A., a global manufacturer of brake friction
materials. This acquisition has transformed our automobile brakes business into the world’s leading player
in the field, with a global market share of over 15%. We are also working rapidly to upgrade our global
production setups in the textiles, electronics and precision instruments businesses as part of our efforts todrive global growth.

Net Sales of Nisshinbo Holdings Inc.

Net Income (Loss)¥325.6

Financial Position¥379.3billionbillionCash Flows

Growing116.5%
Precision Instruments

ChemicalsElectronics¥(7.08)¥10.38¥63.32¥53.83$0.67

Shareholders’ Equity

1,179.43

985.191,034.04

1,036.80

1,063.19

13.29

15.00

15.00

15.00

15.00

15.00

0.19

tie
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2

Net Income (Loss)

Cash DividendssContents

1

Per Share

Real Estate

Key Ratios

atPapers2012

D

Automobile Brakes

Fiscal Year
Ended March 31,

orTextiles2011

rpFiscal Year
Ended March 31,(thousands of
US dollars)

2008

more than ¥600 billion and ROE of over 9% by the fiscal year ending March 2018. To achieve these goals,
we are promoting production and sales in optimal locations worldwide and channeling management(millions of yen)

Return on Assets (ROA)

2.7

(0.3)

0.5

2.7

1.9

Return on Equity (ROE)

5.1

(0.6)

1.0

6.1

5.1

Note: The U.S. dollar amounts in this report are given for convenience only and represent translations of Japanese yen at the rate of ¥80 = US$1.

1

2011
TMD Friction Group S.A. (Luxembourg)
becomes a consolidated subsidiary.

Growing Potential
400

300

Japan Radio Co., Ltd. becomes a consolidated subsidiary, making the electronics
business the largest in the portfolio.

Established Saeron Automotive Corporation (South Korea)

1998

Nisshinbo Holdings Inc. traces its history back to 1907 when it was founded as a specialist
cotton spinning company. Over the last 100 years and more, we have used our textile
spinning and processing technologies to diversify into automobile brakes, paper products,
precision instruments and chemicals. We also moved into the real estate business and, in
2005, added the electronics business to form a portfolio of seven businesses supplying a
range of products and services. Sales in the electronics business now exceed sales in our
founding business of textiles.
Our desire to constantly change the Nisshinbo business model in pursuit of value that isin step with the times is part of our corporate DNA. Today Nisshinbo is targeting a new eraof growth by developing innovative new solutions in the environmental and energy fields.

(billions of yen)

2010

1999

Established PT. Gistex Nisshinbo Indonesia (Indonesia) (now PT. Nisshinbo Indonesia)

2009
Moved to a holding company structure, changing the company name to
Nisshinbo Holdings Inc.

1997
Established Nisshinbo Automotive Manufacturing Inc. (U.S.A.)

1996

2005

Established Nisshinbo Somboon Automotive Co., Ltd. (Thailand)

New Japan Radio
Co., Ltd. becomesa consolidated
subsidiary, launching the electronics
business.

1993
Established Pudong Kobunshi (Shanghai) Co., Ltd. (China)(now Nisshinbo Mechatronics (Shanghai) Co., Ltd.)

1989
Established Kohbunshi (Thailand) Ltd.

200

1972

Net Sales of Nisshinbo Group

Established Nisshinbo
Do Brasil Industria
Textil LTDA. (Brazil)

Electronics
100

1907
Textiles1945

Japan Radio Co., Ltd. established in
1915. Nagano Japan Radio Co., Ltd.
and Ueda Japan Radio Co., Ltd. spunoff from Japan Radio after the war.
New Japan Radio Co., Ltd. establishedin 1961 as a subsidiary of Japan Radio.

Papers1946

Paper manufacturing plant inFuji, Shizuoka Prefecture acquiredin 1945 to make fire resistantand insulating sheets. Shirakaba
dispensing paper and toilet paper
becomes the leading brand in Japanby sales in the late 1950s.

Automobile Brakes
Production of automobile brakelinings starts in 1946 at the Nishi
Arai Plant. Alliance signed in 1984
with brake company Teves to acquire
ABS technology.

Chemicals

Rayon production starts at the
Miai Plant in 1938. Sales of rigid
polyurethane foam product AIRLITEFOAM begin in 1960.

Production of aircraft wings begins
at the Miai Plant in 1943. Productionof plastic bobbins for use in textile
manufacturing starts in 1958. Salesof copy presses, used in sheet metal
processing, get under way in 1971.

11
20
12

10

20

09

20

08

20

07

20

06

20

05

20

04

2000

20

03

20

02

20

01

20

00

20

99

20

98

19

97

19

96

19

95

Precision Instruments

19

94

19

93

19

92

1971

19

91

19

90

19

89

19

88

19

87

1960

19

86

19

85

19

84

19

83

19

82

19

81

19

80

19

19

63
19
64
19
65
19
66
19
67
19
68
19
69
19
70
19
71
19
72
19
73
19
74
19
75
19
76
19
77
19
78
19
79

62

19

61

19

60

19

59

19

58

19

57

Electronics

19

56

19

55

19

54

19

53

1915

Nisshin Cotton Spinning Co., Ltd.
established in Tokyo’s Nihonbashi
area in 1907. Manufacturing gets
under way in 1909 in Kameido,
now Tokyo’s Koto Ward. Kyoto Plant
acquired in 1910.

2

19

52

19

51

19

50

19

49

19

46

19

15

19

19

19

07

0

Years ended March 31

Real Estate

Shopping center opened on site offormer Tosaki Plant in 2000.

3

SOUTH KOREATHAILAND
Nisshinbo Somboon Automotive Co., Ltd. (Automobile brakes)
Nisshinbo Mechatronics (Thailand) Ltd. (Precision instruments)
THAI NJR CO., LTD. (Electronics)

CHINA

Saeron Automotive Corp.
(Automobile brakes)

NISSHINBO PHOTOVOLTAIC KOREACORPORATION (Precision instruments)

AMERICANISSHINBO TEXTILE CHANGZHOU CO., LTD. (Textiles)
Nisshinbo Saeron (Changshu) Automotive Co., Ltd. (Automobile brakes)
Nisshinbo Mechatronics (Shanghai) Co., Ltd. (Precision instruments)
Nisshinbo-Yawei Precision Instruments & Machinery (Jiangsu) Co., Ltd.

Nisshinbo Automotive
Manufacturing Inc. (Automobile brakes)(Precision instruments)
Nisshinbo
Automotive
Manufacturing
Nisshinbo Somboon Automotive

In 1996 we established an automobile brake manufacturing plant in Thailand, which is now
regarded as one of the world’s leading centers for vehicle production. We also opened a
new plastic molded parts plant in Thailand in 2011. In the electronics business, THAI NJR
is reinforcing its manufacturing framework as part of a business restructuring program at
New Japan Radio.

Saeron Automotive

Saeron Automotive is a consolidated
subsidiary listed in South Korea and supplies brake parts to local automakers andother customers in the automotive sector.
We established a company to sell photovoltaic module manufacturing equipment
in South Korea in 2011.

Nisshinbo-Yawei

In China we are working to offer a wider range of competitive products and services.
Recent developments include the start of manufacturing activities for photovoltaic module
manufacturing equipment in 2010 and the establishment of an automobile brake manufacturing facility in 2011. Production will start at a precision instruments plant in Shanghai
in 2012.

GrowingGlobally

We have been manufacturing automobile
brakes in the U.S. since 1995. We
operate a Business Development Centerin Detroit in addition to a manufacturing
plant in Atlanta.

Starting with our textiles business in the Brazilian
market in 1972, we have steadily expanded ouroverseas presence, including the establishment of
automobile brake companies in the U.S. and Thailand.
Under the bold management reforms of our Challenge
2012 Three-Year Management Plan, we are steppingup the development of our global manufacturing andsales network across all our business fields.

TMD’s global manufacturing sites

INDIA
VARDHMAN NISSHINBO GARMENTS
CO., LTD. (Textiles)
Rane Brake Lining Ltd.
(Automobile brakes)

Nisshinbo Mechatronics India
Private Limited(Precision instruments)

INDONESIA
PT. NIKAWA TEXTILE INDUSTRY (Textiles)
PT. NISSHINBO INDONESIA (Textiles)
PT. NAIGAI SHIRTS INDONESIA (Textiles)
PT. MALAKASARI NISSHINBO DENIM INDUSTRY (Textiles)

BRAZIL
Nisshinbo Do Brasil Industria
Textil LTDA. (Textiles)

Rane Brake Lining

In India, in the textiles business, production
has started at a shirt joint venture that
we established with Vardhman Textiles.
In the automobile brakes business, weare transferring technology to Rane Brake
Lining, an equity-method affiliate. In the
precision instruments business, we plan
to start production of plastic molded parts
in 2012.

4

Nisshinbo Do Brasil
PT. NISSHINBO INDONESIA

Indonesia is set to play a key role in our textiles business. Cotton produced by NIKAWA
is processed into shirt fabric by NISSHINBO INDONESIA then made into shirts by NAIGAISHIRTS. Another Group company in Indonesia, MALAKASARI, dyes cotton fabric for use indenim products. We are currently expanding manufacturing capacity at all these companies
to meet rising demand for our high value-added products in Asia’s emerging markets.

In Brazil, a cotton-producing country,
demand for cotton products is increasing rapidly in tandem with economic
growth. We began making cotton yarn
in Brazil in 1972 and we are currently
adding extra capacity.

Our automobile brakes
business now has the top
global market share
Luxembourg-based TMD Friction Group S.A., one of the world’s leading makers ofbrake friction materials, became part of the Nisshinbo Group in November 2011.
TMD has 16 manufacturing sites in 10 countries, bringing the total number ofplants in the automobile brakes business to 24 in 14 countries worldwide.

5

Growing Technology

Working to create a low carbon society

It is also very safe and has proved
popular with users in the plastics
industry. Carbodilite’s characteristics
as a modifier and its highly safe profile
mean that applications are not limited
to bio-plastics. It is used worldwide
in water-based paints and ink and as
an adhesive agent for halogen- andlead-free electronic components, making a significant contribution to thedesign of smaller and lighter digitalequipment. As a result, Carbodilite
now plays an indispensable role inthe development and manufacture of
eco-friendly products.
Carbodilite is helping to expand
applications for bio-plastic, making amajor contribution to the environmental field through its growing use byindustry in automotive, electrical andelectronic product fields.

H2

H2
H2
H2

H2

H2

H2

H2

H2
H2
H2
H
2
Hydrogen-Storing

H2

H2

CarbonAutomotive fuel cells require high-pressure hydrogentanks, which creates a number of technologicaland cost issues. Hydrogen-storing carbon reduces
pressures inside storage tanks, resulting in highly
safe, low-cost hydrogen tanks.

5nm

Carbon Alloy
Catalysts

Carbon alloy catalysts boast catalytic performance(open-circuit voltage and output density) that is
at least as high as platinum, supplies of which areconcentrated in only a few countries. They also
potentially cost less than platinum catalysts.

Carbon Bipolar
PlatesELECTRONIC CONTROL UNIT

Carbon bipolar plates have outstanding corrosion
resistance properties and have captured a dominant
share of the residential polymer electrolyte fuel cell
(PEFC) market.

HYDROGENCYLINDER

FUEL CELLSHYDROGENBATTERY
CURRENT

MOTOR

WATER

Bio-plastic, which is made from cornand other naturally occurring materials,
is attracting growing attention as ecomaterial that reduces environmental
impact. But it has disadvantages suchas low durability and low heat resistance, limiting its range of applications.
Carbodilite, our high-performanceplastic material, dramatically improves
the durability and heat resistance of
bio-plastic when used as a modifier.

H2

IR

CARBODILITE

Our carbon bipolar plates have captured a dominant share in the residential fuel cell market. We are now
working to boost their performanceand reduce costs in time for 2015,
when fuel cell vehicles are set to become more widespread. We are also
aiming to play a key role in creating
the low-carbon society of the futurewith the development of carbon alloy
catalysts and hydrogen-storing carbon
for next-generation eco-cars.

A

One of the corporate principles of the Nisshinbo Group is “to make a significant positive
contribution to the lives of people worldwide as an eco company.” Using the technology
we have accumulated during more than 100 years in business, we aim to contribute to thesustainable development of society by tackling global warming and other environmental issues.
The businesses born from this process will drive the Group’s next stage of growth.

Fuel cells generate electricity without
creating any CO2 emissions by reactinghydrogen with oxygen. Nisshinbo ispushing forward with research and development projects, such as fuel cells,
to help realize a low-carbon future.
Electric double-layer capacitors are
already used in industrial equipment
and construction machinery and weare currently developing new products
for cars to help boost fuel efficiency.

Electric Double-Layer
Capacitors
Electric double-layer capacitors are energy storage devices. They are extremely safe and can berecharged several million times, giving them a long
operational life.

Sales of CARBODILITE(billions of yen)
2.5

Photovoltaic Module
Manufacturing Equipment

2.0

1.5

1.0

0.5

0

08

09

10

11

12

13
(Forecast)

6

This equipment is the mainstay
product in the precision instruments
business. We are now moving into
Asia markets, supported by dominantmarket shares in the solar simulator
and module laminator fields in Japan.

We have established sales and service
centers in China and more recently in
Taiwan and South Korea, as part ofefforts to become a provider of totalsolutions for photovoltaic module
manufacturing equipment.

7

To Our Shareholders
The Great East Japan Earthquake was the main reason
behind the deterioration in earnings
The reasons for the slowdown are clear, so we are confident of a rapid upturn in profits.

Poised for Growth:

2011
2011
2011年
年
年
2010
2010
2010年
年
年

400
400
400
350
350
350

Commitment,
Strength andOpportunity Other
Other
OtherBusinesses
Businesses
Businesses

Real
Real
RealEstate
EstateEstate
2009
2009
2009年
年
年
300
300
300
Upheaval is the word that best describes the last year for the Nisshinbo Group.
Electronics
Electronics
Electronics
250
250
2008
2008
年
年
年2012, the250
In the fiscal year ended2008
March
Group’s earnings were affected by the
Chemicals
Chemicals
Chemicals
200
200
200
Great East Japan Earthquake,thein Thailand and the persistently strong
2007
2007
2007年
年
年 flooding
150
150
150
Precision
Precision
PrecisionInstruments
Instruments
Instruments
yen, leading to a decline in profits. However, by stepping up our overseas business
100
100
100
PapersPapersPapersstrategy and acquiring TMD Friction Group
S.A., I believe we made great progress
50
50
50
Automobile
Automobile
AutomobileBrakes
BrakesBrakestoward our targets of more than ¥600 billion in net sales and ROE of over 9% by thencome
Incomencome fiscal year ending March 2018.

000

2007
2007
2007年
年
年 20082008
2008年
年
年 20092009
2009年
年
年 20102010
2010年
年
年 2012
2012
2012年
年
年

TextilesTextilesTextilesIn the fiscal year ended March 2012,

due to temporary disruption in thefull year, earnings in the automobile

net sales increased 16.5% year on

supply chain and power shortages.

brakes business were not as strong as

year to ¥379.3 billion. However,

Manufacturing costs also rose. We

normal due to the impact of the two

operating income declined 79.0%

estimate the two natural disasters

natural disasters, but net sales andto ¥4.2 billion and net income fell

had a combined impact of nearly ¥10

profits remained on an upward trend

15.8% to ¥9.4 billion. The large

billion on net sales and just under ¥3from the end of the fiscal year.

increase in net sales reflected a fullbillion on operating income.

The Nisshinbo Group’s perform-

year of sales from Japan Radio Co.,

Japan Radio and New Japanance overall therefore deteriorated

Ltd. and Nagano Japan Radio Co.,

Radio Co., Ltd. in the electronics

compared with the previous fiscal

Ltd., which were consolidated in thebusiness, and photovoltaic module

year, but it was quite clear that thisfourth quarter of the previous fiscal

manufacturing equipment in thewas mainly due to the earthquake

year, but profits slumped compared

precision instruments businessand other factors beyond our con-with the previous fiscal year.

registered weak earnings. New

trol. I am confident we will see a

The main reasons for the de-Japan Radio booked ¥4.8 billion in

rapid recovery in earnings starting

cline in profits were the Great Eastbusiness restructuring costs underin the current fiscal year, as strong-Japan Earthquake at the end of theextraordinary losses, which was also

performing businesses continue toprevious fiscal year, the subsequent

partly to blame for the deteriorationdeliver and loss-making businesses

nuclear accident and the serious

in consolidated net income. However,are quickly turned round.

flooding in Thailand. Earnings weresome businesses like textiles andnot as strong as we anticipatedchemicals performed well. Over the

Net Sales and Operating Income(billions(billions(billions
ofofof
yen)
yen)
yen)

Return on Equity(billions(billions(billions
ofofof
yen)
yen)
yen)

20
20
20

400
400
400

Net Income per Share

（％）
（％）
（％）

(yen)
(yen)
(yen)

777

80
80
80

666

15
15
15

300
300
300

60
60
60

555
444

10
10
10

200
200
200

40
40
40

333
222

555

100
100
100

20
20
20

111
000

000

08
08
08 09
09
09 10
10
10 11
11
11 12
12
12

TextilesTextilesTextilesAutomobile
Automobile
Automobile
BrakesBrakesBrakesPrecision
Precision
Precision
Instruments
Instruments
Instruments
Real
Real
Real
EstateEstateEstate

000

-1
-1
-1

000

08
08
08 09
09
09 10
10
10 11
11
11 12
12
12

-10
-10
-10

08
08
08 09
09
09 10
10
10 11
11
11 12
12
12

PapersPapersPapersChemicals
Chemicals
ChemicalsElectronics
Electronics
Electronics

Other
Other
Other
Businesses
Businesses
Businesses

OperatingOperatingOperating
IncomeIncomeIncome89Restructuring the electronics business

The automobile brakes businessis currently enjoying a favorable

product in the business. In 2010 weoperating environment. Global auto

decided to boost production capac-

sales appear to have returned toity at our plant in Thailand and theaster-affected area and new marine

growth levels seen before the col-expanded facility was completed in

Losses are close to being eliminated in the electronics business,but we still need to push ahead with bold restructuring.
The two key operating companies in

Meanwhile, the fall into the red

our electronics business performed

at Japan Radio was a major mis-communications for ships damaged

lapse of Lehman Brothers, while our

2011. This year, a new company will

poorly during the fiscal year ended

calculation in the fiscal year ended

or destroyed by the disaster.

manufacturing sites in Japan, thestart production in India.

March 2012.

March 2012. This subsidiary conducts

Even assuming that earnings at

U.S., Thailand, South Korea, China

In September 2011, we estab-a great deal of business with public

Japan Radio improve in line with ourand India returned to full operating

lished Nisshinbo Singapore Pte. Ltd.,

deteriorated sharply at the begin-sector clients, so it was severely

expectations, we need to face the fact

capacity from the second half of thea regional subsidiary that will leadning of the fiscal year due to majoraffected by the Great East Japanthat the current business model was

fiscal year. In 2011, we establishedefforts to build a stronger operatingchanges in the economic environ-

Earthquake. The earthquake caused

the reason for the sudden deteriora-

Nisshinbo Saeron (Changshu) Au-

base overseas. Nisshinbo Singapore

ment such as the downturn in the

disruption to budget execution attion in earnings performance. We

tomotive Co., Ltd. in China and wewill provide financial support todomestic economy and the strong

central and local governments, withneed to wean Japan Radio off publicplan to significantly boost production

overseas operating sites through ayen. In response, we started rolling

many new projects being put on holdsector demand, secure more businessat the company from autumn 2012.

global cash management system. It

out a radical business restructuring

or delayed. This caused a sharp dropfrom the private sector and transform

We also intend to increase output atwill also be responsible for internal

plan from August 2011. Specifically,in sales at Japan Radio. However,it into a globally competitive company.

facturing sites in Indonesia, giving

other manufacturing sites worldwide.

control and personnel training. We

as part of our strategy to rapidly shift

the outlook for the company is not

A new management team at Japanus extra overseas capacity for APOL-

The plastic molding and process-established a similar subsidiary inproduction overseas, we announced

necessarily bad. In the current fiscal

Radio is now looking in close detail at

LOCOT products. We also switcheding business, which is part of the

Shanghai in March 2012 to provide

an early retirement program in Japan

year, we forecast a rapid recovery

business restructuring measures. Our

production of denim to our sites inprecision instruments business, is also

the same support to Group compa-

that eventually attracted nearly 400

in earnings owing to a rebound in

aim is to carry out a radical restructur-Indonesia. We expect this to support

performing well at the moment. We

nies in the region. Looking ahead, weapplicants. These and other restruc-public sector demand as government

ing of the entire electronics business,

an improvement in profitability.

are seeing strong customer interest

plan to give both companies regional

turing initiatives are supporting aagencies start spending again. We

including Nagano Japan Radio andrapid recovery at New Japan Radioalso see strong rebuilding demand

Ueda Japan Radio Co., Ltd., to create

and we expect a return to profit insuch as the installation of com-the optimum product development

the fiscal year ending March 2013.

munications equipment in the dis-and manufacturing framework.

Earnings at New Japan Radiohead office functions.
Long-term Targets(%)(billions of yen)
1,000

Acquired JRC and Nagano JRC

900

Many businesses are making great strides overseas
Textiles, automobile brakes and plastic molded parts were behind the growth inglobal production capacity.

9Long-term ROE target over 9%(Dec 2010)

8

The Great East Japan Earthquake(Mar 2011)

800

Long-term
net sales target
more than ¥600 billion(Nov 2011)(Sep 2008)

700

7

Acquired TMD

Lehman Brothers collapse

6

600

5

500

4

Our founding business of textiles did

This year it was profitable both

hot summer and efforts to conserve

well to maintain its move towards

at home and abroad. This mainly

power. However, overseas production

400

3sustained profits in the fiscal year

reflected the benefits of a shift inundoubtedly made our high value-300

2

ended March 2012. I think thisproduction from Japan to other coun-added products like APOLLOCOT

200

1deserves a special mention. In thetries over the past few years. Also,

100% cotton non-iron shirts muchprevious fiscal year it reported profits

sales of shirts in the domestic market

more cost competitive. Output was

100

0overseas but incurred losses in Japan.

were strong, partly helped by theincreased as planned at our manu-

005
Textiles10

in air conditioner fans, the mainstay

06

07

08

Automobile Brakes

09
Papers101112Precision Instruments

13

14
Chemicals

15

16Electronics

17

18

-1

Real Estate, etc.

11

Our automobile brakes business becomes the world leader
We anticipate significant synergies from our acquisition of TMD.

challenging market conditions provideof expertise in power storage andus with a good opportunity to de-electrical control systems. A smart

velop even better products. Centeredfactory test facility started operatingon Nisshinbo-Yawei Precision Instru-

We acquired TMD Friction Group S.A.

than simply adding together ourat the Tokushima business site inments & Machinery (Jiangsu) Co., Ltd.

in November 2011, making Nisshinbo

respective shares. Specialist teams

May 2012.

in China, we will strive to supply our

the world’s leading manufacturer offrom both companies are alreadyHowever, during the fiscal

brake friction materials. TMD is one

inspecting plants worldwide in anyear ended March 2012, sales ofof the largest companies in the brakeeffort to identify potential synergies

photovoltaic module manufacturing

friction material sector, mainly sup-in development, procurement, pro-equipment were weak. This reflected

plying European automakers. It has

duction and sales.

a global glut in solar panel inventory.

production and sales sites in key mar-

The acquisition is unlikely to

Nevertheless, we believe the market

kets worldwide, but it is an ideal fit

boost profits in the near term, as

is set to grow, supported by the startwith our business as there is minimal

goodwill of around ¥25 billion arisingof power buyback subsidies in Japan

overlap in terms of plants, technolo-

from the deal will be amortized over

and other positive factors. We thinkgies and customers. The acquisition

the next five years starting from thewill give a substantial boost to thefirst year of consolidation. However,product lineup and customer basewe see great things ahead for ourat both Nisshinbo and TMD, so we

automobile brakes business.

anticipate market share gains greater

customers with the most competitive
products in the market.

Committed to delivering growth
Our target of more than ¥600 billion in net sales is within sight.

Progress in the energy and environmental businesses
New shoots are starting to emerge.

Under Challenge 2012, our Three-

Following the acquisition of TMD, we

to tackle head-on the need toYear Management Plan launched

are forecasting net sales of arounddevelop Japanese technologies thatin April 2012, we are channeling¥475 billion in the fiscal year ending

can contribute to the economy andmanagement resources into core

March 2013, so our sales target issociety. In this way, I believe we cantechnologies and aiming to boost

within sight.

play a key role in revitalizing Japan’s

As an eco-company, Nisshinbo isvolume production line at a plant inments of the strawberries are alreadycost competitiveness by shifting

However, we are concerned that

aiming to help reduce CO2 emissions

Chiba Prefecture and we view 2012

under way. Because the strawberries

production to overseas sites andthe economic and social environmentand solve other environmental issues

as a crucial year in winning businessare cultivated under artificial light

expanding overseas procurement. We

in Japan is weighing on our domestic

we face today.

from automotive customers. We are

and in sealed hygienic spaces, foodalso plan to convert idle real estate at

manufacturing operations due toIn the fiscal year ended March

also ramping up the development ofsafety and yields are extremely high.

former manufacturing sites in Japanfactors such as the persistently strong

2012, demand for bio-plastic modifiercarbon bipolar plates and other fuelBesides, they also taste good. The

into cash through real estate develop-

yen, power shortages and political

Carbodilite was very strong. Output

cell-related products to ensure theyplant factory meets the needs ofment, and then use this cash to invest

instability. If manufacturers are forcedof bio-plastic is rising worldwide andare adopted in time for the projected

Japanese consumers by providing

in new businesses. In order to remain

to continue shifting production

plastic manufacturers are adding

uptake in fuel cell vehicles from 2015.

them with reliable supplies of safe

viable in the face of intense global

overseas, Japan could see a hollowing

extra capacity. In response, we will

Meanwhile, a team working at

food. In the future, we believe ourcompetition, we will also strive toout of its technology base. I believe

manufacturing sector.

June 2012

work to boost production capacity for

a former plant site in Tokushima

facility will help Japan become more

expand the scale of our business. We

Japan needs to take urgent steps toCarbodilite to ensure stable supplies.

became the first in Japan to success-self-sufficient in food. We are also

are targeting net sales of more thanmaintain the domestic manufacturing

In electric double-layer capacitors,

fully cultivate strawberries on a large

working to convert some areas of¥600 billion and ROE of over 9% bysector’s technological capabilities. As

Shizuka Uzawa

scale using only artificial light. Ship-

the plant factory into a smart factory

the fiscal year ending March 2018.

an eco-company, I want Nisshinbo

President

we have set up an initial medium-12

by drawing on the Group‘s wealth13

TMD Friction Group S.A.

Acquisition of TMD
Friction Group S.A.
transforms our
automobile brakes
business into the global
market leader

About the TMD Friction Group S.A.
(millions of euros)
80

Net Sales

60

Operating
Income

40
20
0

TMD

12/09

12/10

12/11

is Europe’s largest maker of brake friction
materials with 16 manufacturing sites in

10 countries worldwide. TMD has a long history stretchingback to the establishment of its predecessor company Small

Number of
Employees

management plan is to promote a global strategy basedon production and sales in optimal locations. In November 2011, Nisshinbo acquired TMD Friction Group S.A., aglobal manufacturer of brake friction materials based in
Luxembourg. This deal has made the Nisshinbo Group theleading maker of brake products, with more than 15% of
the worldwide market.

Synergies with TMD

Comparison of Nisshinbo automobile
brake business and TMD (FY 2011)

TMD Sales

One of the goals of the Nisshinbo Group’s medium-term

Nisshinbo

TMD¥47.4 billion¥69.3 billion

4.2 billion

1.4 billion

2,200

Around(as of end-March 2012)

4,800

Around(as of end-December 2011)

TMD is an ideal fit for Nisshinbo thanks to its strong pres-

1. Global leadership in the friction materials market
2. Greater business reach through complementary technologies
3. Cost synergies
4. Global workforce and organization
a number of synergies from TMD’s
We envisage
inclusion in our automobile brakes business.

strong in low-steel materials, while Nisshinbo is focused on
non-asbestos organic (NAO) materials. These complemen-First, we have now secured a leading position intary technologies, as well as our different customer bases,

the global friction materials market. We need to be cost

will allow us to meet the diverse demands of automakers

competitive and expand globally to stake our claim as

through a wide range of friction material products forthe leading company in the automobile friction materials

different types of vehicles.

market. We believe TMD is an ideal partner, as there is

Third is cost synergies. We plan to integrate raw mate-ence in Europe, China and South America. China is the only

limited overlap in manufacturing networks. We have sites

rial procurement as part of efforts to combine our distribu-

country where we have overlapping production facilities.

in Japan (two), South Korea, China (two), Thailand, Indiation networks. We already estimate this will deliver cost

and the U.S., while TMD has production bases in the U.K.

savings of several hundred million yen.

TMD is larger than our automobile brakes business, which

and Parks in 1881. TMD still sells Small and Parks’ original

generated sales of ¥47.4 billion in the fiscal year ended March(three), Germany (four), Romania, France, Spain, China

Don brand of brake friction parts, which have won the2012 compared with ¥69.3 billion (€ 660 million) at TMD(two), Mexico, Brazil and South Africa, and one develop-

tion. We plan to reinforce our management and business

confidence of customers during more than 100 years on the(fiscal year ended December 2011). TMD has a workforce ofment center in the U.S. Nisshinbo and TMD production sites

structure worldwide and secure leading overseas businessmarket.

around 4,800, compared with 2,200 in our business. We are

overlap in China, but we do not see this as a problem, as

executives. We will also nurture and build a team offocused on automobile brakes, while TMD also supplies brakeour main customers in the country are Japanese and South

Nisshinbo personnel who can operate globally to help drive

products for trains and industrial machinery.

Korean automakers, while TMD mainly supplies European

the Group’s expansion overseas.

Global Market Share
Nisshinbo GroupThe fourth synergy is a global workforce and organiza-

automakers. This combined network gives our automobile

After TMD joins the Group, the automobile brakes

brakes business coverage in almost all the world’s main

business will account for roughly 25% of consolidated sales,

automotive production markets and the top market position

making it one of the key pillars in the Group along with theworldwide with a share of over 15%.

electronics business. The friction materials market for conven-

The second synergy is an increase in business reachtionally powered vehicles is projected to continue expanding

through complementary technologies. Friction materials

for more than 10 years, even with the emergence of electric

are categorized into three types depending on the ratio of

vehicles and other new modes of transport. We plan tosteel fiber content (please refer to the table below). TMD isaccelerate growth in our automobile brakes business, which
now has significantly enhanced its global presence.

Types of brake friction materials
RegionRoad conditions

Required performance

EuropeExpressways such as autobahns with nospeed limits

Powerful braking capabilities Low-steel materials

Japan and the U.S. Expressways with speed limits of 100miles/ Smooth braking with nohour in the U.S., 100km/hour in Japansquealing or vibration

Main friction material Steel fiber content

NAO materials
Semi-metal materials

5~10%
0%
20~50%

Durability

1415

Plant Factories
In September 2011, we became the first company in Japan to successfully cultivate strawberries on a large scale using only artificial light. Many

Plant factories—
the ultimate approach toagriculture

Japanese companies are stepping up efforts to develop plant factories,
but Nisshinbo is close to commercializing its business. We spoke to
Tadatoshi Manabe, who is responsible for developing Nisshinbo’s plantfactories as head of the new business development division.

Q.2 Please tell us about Nisshinbo’s initiatives in the plant factory field.

Tadatoshi Manabe
Senior Manager
Business Development Department

Why are Japanese companies stepping up initiatives to
Q.1
develop plant factories and what are their merits?

Manabe: for quite a long time, but the rapid

conventional cultivation methods. Unlike agriculture thatdevelopment in Japan recently has been spurred by sup-food producers to carefully control all factors related toport from the Ministry of Agriculture, Forestry and Fisheries

production, such as nutrition levels, temperature, humidity(MAFF) and the Ministry of Economy, Trade and Industry

and lighting. This means that the production of foodstuffs(METI). This support has been prompted by a worrying

does not have to be carried out in specific areas dictatedoutlook for Japan’s agricultural production capability,

by weather conditions, opening the way for agriculture inwith the agricultural workforce aging dramatically at theinhospitable places such as deserts or cold regions.

Plant factories have been around16

relies on the natural environment, plant factories allow

same time concerns are rising about our ability to secure

The ability to control all aspects of the production

sufficient imports of foodstuffs due to explosive growthenvironment also allows farmers to monitor yields morein the world’s population. In addition to improving foodaccurately, leading to increases in productivity. In that

self-sufficiency, plant factories are seen as an effective

sense, plant factories are also giant experimental facilities,

means of ensuring food safety, which should also drive

not simply places to grow plants. Given that mankind has

their future development.

always sought to improve the quality of agricultural pro-

Plant factories have a number of advantages. Becauseduce within the limits of the natural environment, I believe

plant cultivation is carried out in sealed indoor spaces, food

one of the key advantages of plant factories is their ability

hygiene is extremely high and yields are much greater thanto turn this approach on its head.

plants indoors is not actuManabe: Cultivating
ally that difficult, provided the rightstrawberries outdoors is from December through May, but

equipment is installed. However, marketing vegetables

berries of the same quality from June through November.

our thinking behind the plant factory was to supply straw-

that have been cultivated indoors is regarded as a difficult

Growing strawberries using only artificial light was

proposition, because Japanese consumers fully trust thewidely considered to be extremely difficult, so our successsafety of domestic produce and farmers using conventionalin establishing a profitable indoor strawberry cultivation

methods can supply vegetables at relatively low prices. The

business is a major step forward. We have branded ourhigh startup costs of plant factories also mean it is hard

strawberries APOLLOBERRY. In addition to the Tokushima

to achieve profitability. These are the main reasons why

plant, we plan to start producing them at our Fujieda

conventional outdoor cultivation is yet to be replaced byplant in Shizuoka Prefecture next fiscal year. Our goal is toplant factories.

gradually expand sales of our strawberries across Japan.

We therefore decided to focus on strawberries due

Tokushima and Shizuoka are both well-known strawberry

to their seasonal supply patterns and high market price,cultivating areas and local governments there are hoping

which offer better prospects for generating profits. Gener-

APOLLOBERRY will become a new specialty product to beally speaking, the best period for growing sweet and tasty

associated with their regions.

Q.3 What business opportunities do you see ahead?
believe the opportunities are limitless.
Manabe: IFirst,
I want to build on the positive
feedback we have received for APOLLOBERRY by expanding
production and rapidly building the brand, while continually
responding to consumer needs. The next step would be tosell our APOLLOBERRY plant factories to food producers
nationwide, so that they can benefit from our expertise in
the field. We are also receiving considerable interest frompotential customers in China and other countries. We think
our plant factories could also contribute to the rebuilding
effort in the Tohoku region. Achieving profitability with plantfactories has its challenges, but we are already searchingfor the next plant after strawberries that can be profitably
cultivated indoors.

17

Precision Instruments

TextilesAt a Glance

Segment ShareNet Sales(billions of yen)

Net Sales

Segment ShareNet Sales

Segment Share

32.0

61.0

57.4

(billions of yen)

Chemicals
8.3

7.3

25.2

7.2%

(billions of yen)

2.3%

17.4%
11

11

12

Mainstay business is products made from natural cotton; supplies
high-quality “Made by Nisshinbo” dress shirts, denim, uniforms
and other products to markets worldwide— Shirts:

The Nisshinbo Group comprises seven businesses:
textiles, automobile brakes, papers, precision
instruments, chemicals, electronics and realestate. Leveraging the technologies and assets of
our original cotton spinning business, we havediversified into other business fields, where we
supply high value-added products to satisfy a rangeof customer needs.

Dress shirts, casual shirts and fabric

1112

Supplies a wide range of products in the rapidly growing environmental and energy fields, including photovoltaic module
manufacturing equipment, air conditioner fans and processed
precision automotive parts— Photovoltaic module manufacturing equipment:— Textiles:

Photovoltaic module laminators, solar simulators, EL cell inspection
equipment and edge isolation systems

Uniform fabric and casual fabric— Denim:— Precision parts processing— Plastic molding and processing

Jeans and denim fabric— Others

Segment ShareNet Sales(billions of yen)

— Bipolar plates for fuel cells— Carbodilite high-performance chemical additive— Rigid urethane foam
— Mobilon urethane elastomer— Carbon products

Challenge 2012 Targets

Challenge 2012 Targets

1. Establish optimal production and sales structures through further
expansion of overseas production sites in Indonesia, India, China
and other countries and shift production from Japan to reconstruct
the business on a global level.

1. Develop the photovoltaic module manufacturing equipment
business on a global scale with a focus on East Asia.

1. Use expertise in the chemicals business to actively develop
environment-related businesses.

2. Expand the photovoltaic module business as a total solution
business that integrates materials, manufacturing equipment andconsulting on ideal processing conditions.

2. Reinforce face-to-face customer interactions and develop original
products.

2. Position domestic business sites as technology development bases
and focus on the development of competitive new products andtechnologies.

PapersSegment Share

47.5

46.1

Manufactures a range of highly promising products for the future, such as Carbodilite, an additive used in bio-plastic manufacturing, and bipolar plates for fuel cells

Challenge 2012 Targets

Electronics
Net Sales(billions of yen)

30.3

3. Expand sales of strategic products, including bipolar plates for fuelcells and Carbodilite high-performance resin.
4. Expand the capacitor business to include automotive applications.

3. Use original processing technologies to develop and market
products that respond to market changes and customer needs.

Automobile Brakes

Segment Share

Real Estate

Net Sales(billions of yen)

12.4
9.1

48.4%
2.6%

Supplies automotive brake products underpinned by Nisshinbo’s
track record and trusted brand in the field; currently expanding
its presence as a global supplier, with manufacturing bases inNorth America, South Korea, Thailand and China; acquired TMD
Friction Group S.A., Europe’s largest manufacturer of brake friction materials, in 2011

— Household paper products:

Tissues, bathroom tissue paper (made with virgin and recycled pulp) andkitchen-related products— Assembly products:— Processed paper products:

Drum brake products

12

Makes high value-added products for everyday use such as toilet
paper and other household paper products, specialty paper usedin pamphlets and other materials and processed paper products
such as telegram paper— Specialty paper:

Brake linings and disc pads

Fine paper and synthetic paper

11

2%
11

12

12

Using the consolidation of Japan Radio, a pioneer in wireless communication devices, to develop and reinforce its presence in power
generation, storage, and control in the energy business field

Contributing to the growth and financial strength of the Nisshinbo Group by effectively utilizing idle assets arising from the shift
to operations overseas— Semiconductor products— Information and communications devices and equipment— Power supply units and electronic components— Microwave products— Electronic medical devices and instruments— Leasing:
ARIO Nishi Arai and other properties— Sales:

Unused sites at the former Harisaki Plant and the former Hamamatsu
Plant

Telegram paper, high-end packaging and other products

Challenge 2012 Targets

Challenge 2012 Targets

Business targets for the fiscal year ending March 2013

Challenge 2012 Targets

1. Expand business by implementing global business strategies thattake local market characteristics into account.

1. Reinforce and develop sales and production systems tailored tocustomer needs in the household, specialty and processed paper
product business lines.

1. Refocus the business on overseas markets and smart electronics.
2. Rebuild the production framework for the whole Group.
3. Develop products that are globally competitive.
4. Maximize cash flow (improve business efficiency).

Slim up properties by selling out idle real estate and then invest thefunds in launching new businesses and expanding businesses in Asian
countries.

2. Develop original products with high price competitiveness thattake customer needs and the global environment into consideration. Also, establish development structures based on futuretechnology trends, such as electronic control of brakes.
3. Conduct comprehensive inspections of quality control systems andreinforce supply chain management (SCM) to maintain the highreliability of these crucial safety products.

18

11— Friction materials:(billions of yen)

112.8

13.5%
12

Net Sales

Segment Share

169.9

30.2

8.6%

11

12

2. Develop new products, enhance design and planning capabilities
to distinguish our products, and reinforce alliances with othercompanies.
3. Reinforce alliances with overseas companies through OEM arrangements and capital tie-ups to promote production and sales in
optimal locations.

Business targets for the fiscal year ending March 2013 have been provided,
as Challenge 2012 was formulated in 2009, prior to the consolidation ofJapan Radio Co., Ltd. and other subsidiaries.

19

Overview of Business Segments
TextilesAutomobile Brakes

Nisshinbo Textile Inc.

Nisshinbo Brake Inc.

Since its founding in 1907, Nisshinbo has led the Japanese textile industry with its state-of-the-art technologies andhigh quality. Nisshinbo expanded its business into the spinning, weaving, processing and sewing fields and possesses
some of the world’s most advanced technologies in areas ranging from development to production. It is currently
expanding overseas sites in Indonesia, Brazil, India, China and elsewhere while pushing ahead with the developmentof new products and technologies at business sites in Japan.

Nisshinbo is a global supplier with world-class development capabilities in the field of friction materials, which are
key components of automobile brake systems. In November 2011, Nisshinbo acquired Luxembourg-based TMD Friction Group S.A., a maker of brake friction materials. As the world’s largest maker of brake friction materials, Nisshinbo
will respond to global automaker needs for optimum parts procurement.

Summary of Financial Results for thein Thailand, due to the serious flooding

In November 2011, we acquired Lux-

Fiscal Year Ended March 2012that affected the country from Octoberembourg-based TMD, a maker of brake

which is currently selling well, we plan

In the fiscal year ended March 31, 2012,

through December 2011.

friction materials. This acquisition has

to boost sales volume to 1.5 million units

the automobile brakes business reported

In addition, the strong yen weighed

transformed Nisshinbo into the world’s

for business shirts and to 500,000 units

net sales of ¥47,450 million, up 2.9%

heavily on earnings both in Japan andlargest maker of friction materials. TMD is

Summary of Financial Results for theremained difficult, so we transferred a

In the APOLLOCOT product range,

Fiscal Year Ended March 2012

significant amount of domestic produc-

The textiles business is restructuring its

tion capacity to a joint venture based inoperations in line with strategy in theIndonesia.
declinedfor handkerchiefs. We also plan to launchfrom the previous fiscal year, and oper-

overseas. As a result, profits declined year

a good fit with Nisshinbo in terms of key

plan. Specific operational improvements

sharply in Brazil due to deterioration

cotton business pants, knitted businessating income of ¥4,254 million, downon year despite the growth in sales.

production sites and markets, customers

included making greater use of over-in market conditions caused by sharp

shirts and 100% cotton stretch knitwear

16.4%.

seas yarn and fabric production, andfluctuations in raw cotton prices, but

in response to customer needs.

focusing on sales of high value-added

profits improved sharply at our two main

We plan to make further improve-

products. As a result, in the fiscal year

subsidiaries in Indonesia due to efforts

ended March 2012, the textiles businessto expand output and make manufac-

reported higher sales year on year andcurrent

medium-term

management

Overseas,

profitability

and products. We have formed a project
Business Strategies and Outlook forteam made up of key personnel in each

sharply in April and May 2011 immedi-

the Fiscal Year Ending March 2013

company’s development, manufacturing,ments to overseas production sites toately after the Great East Japan Earth-

The global automobile market is cur-sales and administrative divisions. The

leverage a greater impact from ourquake. However, sales steadily recovered,rently strong owing to buoyant demand inteam will work to identify strengths andturing processes more efficient. We also

investments. In Indonesia, we will shift

supported by the reintroduction of sales

emerging markets, particularly Asia, andissues in each company then develop ana large rise in profits. Net sales totaled

installed a new APOLLOCOT shirt pro-to full output of APOLLOCOT shirts andsubsidies by the government. Demand re-

growing signs of a recovery in the U.S. We

action plan.

¥60,964 million, up 6.2% from the pre-duction line at our sewing subsidiary instart a new uniform production line

mained at a high level from January 2012.

also expect demand to rise in the domes-

Separately, as part of our efforts tovious fiscal year, and operating income

Indonesia, which has relocated to larger

at our sewing subsidiary. We will also

As a result, sales in the automobile brakes

tic market in the near term on the backprotect the environment, we are work-was ¥840 million, up 356.5%.

facilities. Output of these shirts is now

boost output at our denim joint venturebusiness increased slightly year on year.

of government subsidies. Against thising to make our products compatible

growing steadily.

in Indonesia. In India, we plan to further

However, manufacturing costs rose due

backdrop, operating rates are already highwith regulations on the use of copper inincrease production volume at our shirt

to efforts to reduce electricity usage inat our plants in Japan and overseas. We

friction materials. A group of specialists

manufacturing joint venture.

peak hours from July through September

therefore plan to boost production capac-

in friction material R&D is encouraging

in response to power shortages.

ity, mainly at overseas sites, to respond to

greater cooperation between our global

In Japan, sales of APOLLOCOT shirts
were strong. Sales of fabric for short-

In Japan, automobile retail sales fell

sleeved shirts, which were designed toBusiness Strategies and Outlook forbe cooler in the summer during power

the Fiscal Year Ending March 2013

shortages, were healthy, as were sales

Despite continued uncertainty in thedevelopment functions currently based

Overseas, sales in South Korea andrising demand in each region. Specifically,

development sites in order to rapidlyof fabric for uniforms. Also, shirt appareleconomy, the textiles business will workat three business sites (Fujieda, Miai andChina were strong but orders in thewe plan to start production in autumn

develop materials that comply with new

subsidiary CHOYA CORP. moved into theto boost sales of new products and carry

Tokushima) and enhance cooperation

U.S. declined due to the impact of the2012 at Nisshinbo Saeron (Changshu)

regulations on copper content.*

black. Conditions in the denim businessout further business restructuring.

with the chemicals business in order toearthquake in Japan. Orders also declined

Automotive Co., Ltd., a manufacturing* The U.S. state of California has passed a law, effective from 2021, prohibiting the sale of new friction
materials or vehicles fitted with friction materials
that have a copper content of more than 5%. From2023, the limit on copper content will be reduced tono more than 0.5%.

In Japan, we will integrate productensure a steady stream of new productlaunches and next-generation productSegment Income

development.

subsidy established in China in 2011.

Segment Income(millions of yen)(millions of yen)

1,500

6,000

1,000

5,000

500

4,000

0
APOLLOCOT
100% cotton non-iron shirt-500-1,0002,000-1,5001,000-2,000-2,50020Disc pad

3,000

2010

2011

0

2012

2010

2011

2012

Domestic(2,723)

(800)

847

Domestic

2,959

2,751

2,615

Overseas

302

822

76

Overseas

1,135

2,279

1,788

Eliminations

202

161

(83)

Eliminations

(215)

61

(149)

(2,220)

184

840

Total

3,880

5,090

4,254

Total

21

Overview of Business Segments
PapersPrecision Instruments

Nisshinbo Paper Products Inc.

Nisshinbo Mechatronics Inc.

This business supplies high added-value paper products that match market needs in three fields: household paper
products, specialty paper and processed paper products. Nisshinbo branded paper products are used widely in many
areas of society today. In the household products segment, we supply bathroom tissue paper for use with bidets,
COTTON FEEL tissue paper that contains real cotton and flushable paper for the nursing care market; in the specialty
paper segment, we sell high-grade printing paper products such as VENT NOUVEAU for the fine paper field andKI•HOU•SHI in the packaging field; and in the processed paper products segment, we supply telegram paper, luxury
packaging and other products.

Summary of Financial Results for theUtilizing know-how accumulated over roughly 70 years as a machine tool maker supporting various manufacturing industries, Nisshinbo is focusing on three businesses in this field: manufacturing equipment for photovoltaic modules,
which are seen as a promising source of clean energy; precision automotive parts, which help improve the safety andenvironmental performance of cars; and plastic molding and processing, primarily fans for air conditioners. We aredeveloping these businesses globally, centered on Asia.

Summary of Financial Results for thecaused by a decline in orders after thestarted production of fans for air condi-

Fiscal Year Ended March 2012

Thai flooding.

tioners in June 2012. Volume production

Despite these issues, profitability

higher prices for raw materials and fuel,In the fiscal year ended March 2012, theDamage to facilities in the precisionof precision parts also got under way at

Fiscal Year Ended March 2012

improved due to price hikes and efforts

and falling demand centered on the com-

precision instruments business reported

instruments business was minimal, andan existing plant in Shanghai in the fiscal

In the fiscal year ended March 2012, theto boost sales of high-margin products

mercial printing sector. Against this back-net sales of ¥25,191 million, down 21.3%

manufacturing facilities in Thailand es-

year ended March 31, 2012.

paper products business reported net

in household paper products, and as adrop, we will offer a wider choice of newfrom the previous fiscal year, and an op-

caped any direct impact from the flood-

We continue to believe the photo-sales of ¥30,220 million, down 0.3%

result of strong sales of photo mounts

and distinctive products and reduce costs

erating loss of ¥1,070 million, a deteriora-

ing. However, our customers and parts

voltaic module market is poised for major

year on year. Operating income totaled

and packaging-related products into boost profitability. We will also focus

tion of ¥2,483 million year on year.

suppliers were affected by both natural

expansion, but expect market conditions¥260 million, an improvement of ¥407

processed paper products. Lower prices

on upgrading our production and sales

disasters, leading to the decline in orders

to remain tough in 2012 and through tomillion from the previous fiscal year.

for raw materials such as pulp and ef-

network through overseas expansion.

for photovoltaic modules fell sharply year

and shipments mentioned earlier.

2013. In the meantime, we are prepar-

Although manufacturing facilities were

forts to reduce costs also contributed to

In household paper products, we

on year, owing to excessive inventories ofing for the projected sharp increase in

not damaged by the Great East Japanthe improvement. However, the specialty

are strengthening our supply framework

photovoltaic modules caused by changes*Feed-in Tariffs: Government subsidies designed topromote solar power by offering fixed prices forelectricity bought by power companies.

Earthquake, the business segment waspaper business weighed on segment

in Japan and overseas as part of efforts

to FIT* in Europe. As a result, our subsidi-

affected in a number of other ways. De-

earnings due to a drop in orders forto become a household paper productary in China, Nisshinbo-Yawei Precision

Business Strategies and Outlook for

ment, reducing costs and enhancing ourmand for household paper products rosehigh-grade printing paper from South

trading business with a manufactur-

Instruments & Machinery (Jiangsu) Co.,

the Fiscal Year Ending March 2013global operating framework. We have

sharply immediately after the earthquake,

Korea caused by the strong yen.

ing base. We also intend to enhanceLtd., was forced to cut back production.

Amid a favorable global market environ-also successfully developed LED mount-earnings power by increasing sales ofIn precision parts processing, orders andment for precision parts used in automo-

ing equipment that can reduce electric-

but demand for telegram greeting paper

Sales of manufacturing equipment

demand by developing competitive photovoltaic module manufacturing equip-

and commercial printing paper declined

Business Strategies and Outlook forhigh-margin products such as bathroom

shipments declined due to the impact onbiles and air conditioners, we plan to boost

ity consumption by more than 80%

as consumers made a conscious decision

the Fiscal Year Ending March 2013

tissue paper for use with bidets and by

Japanese automakers of the Great East

manufacturing capacity in Asia, mainlycompared with existing equipment. This

to rein in spending after the disaster.

The operating environment in this seg-leveraging a greater impact from invest-

Japan Earthquake, yen appreciation andfor precision parts and plastic molded

is a promising new product and we are

Manufacturing costs also increased, as

ment remains challenging due to electric-

ments at consolidated subsidiary Tokaiflooding in Thailand. In plastic molding

parts, in order to expand the business. In

currently focusing on developing volume

the segment was forced to adjust out-

ity price hikes by TEPCO, lower demand in

Seishi Kogyo Co., Ltd.

and processing, demand for air condi-

August 2011, we established Nisshinbo

production test models with a view to

put and production shifts in response toareas affected by the disaster, weak con-

In specialty paper, we will strive totioner fans grew in markets across Asia,

Mechatronics India Private Limited in thestarting sales in August 2012.

power shortages during the summer.

sumer spending in the domestic market,

increase sales of existing fine paper andbut this failed to offset a drop in sales

suburbs of Delhi, India. This new company

synthetic paper products, export our
products to other markets, particularly in

Segment Income

East Asia, and work to create new mar-

Segment Income(millions of yen)kets for our packaging-related products.

(millions of yen)

2,000

In processed paper products, we

2,000

1,500

have already seen some success in the

1,500

luxury packaging field, where we are

1,000

1,000

developing and proposing products

220leading overseas packaging manufactur-

0
-500

500

with unique designs and functions to

500

2010

2011

2012

Household

1,077

(661)

(246)

Fine Papers

739

618

615

Eliminations

(110)

(103)

(108)

Total

1,706

(146)

260

Bath tissue designed
specifically for bidets withtwice the absorbency

Plastic molding parts

ers. Looking ahead, we are aiming to-500

become a global supplier of processed-1,000paper products, which may involve car-

-1,500rying out production and sales overseas.

2010

2011

2012

(583)

741

(1,653)

Plastics

57

672

584

Total

(526)

1,414

(1,070)Mechatronics

Photovoltaic
module laminator23

Overview of Business Segments
ChemicalsElectronics

Nisshinbo Chemical Inc.

Japan Radio Co., Ltd.

Utilizing its know-how in the chemicals field, Nisshinbo is working on a daily basis to help realize a low-carbon society. Our environment- and energy-related products include bipolar plates for fuel cells, electric double-layer capacitors and Carbodilite, which is a high-performance plastic material that increases the durability of bio-plastics. We areinvesting management resources in these promising growth areas as a matter of priority.

This segment is Nisshinbo’s largest and is centered on leading communications equipment company Japan Radio Co.,
Ltd. Other major subsidiaries in the segment include New Japan Radio Co., Ltd, Nagano Japan Radio Co., Ltd. andUeda Japan Radio Co., Ltd., which operate businesses in the semiconductor, electronic equipment and communications fields.

Summary of Financial Results for thepacitors were officially adopted for use

Sales of Ene-Farm systems are likely toSummary of Financial Results for the

Fiscal Year Ended March 2012

in hybrid excavators by customers in theremain strong, and we plan to leverage

Fiscal Year Ended March 2012

earnings. First was business restructur-

In the fiscal year ended March 2012, theconstruction machinery field. We are also

our high market share in bipolar plates forIn the fiscal year ended March 2012, theing at New Japan Radio. Earnings at thischemicals business reported net salesreceiving interest in these capacitors fromfuel cells to further boost sales. We also

electronics business reported a sharp

company have deteriorated due to a drop

Business Strategies and Outlook forof ¥8,258 million, up 13.4% from theseveral automakers. We have provided

plan to secure new customers overseas

rise in sales owing to a full year of sales

in orders of mainstay analog semiconduc-

the Fiscal Year Ending March 2013previous fiscal year, and operating in-samples and are conducting testing pro-using the expertise we have built up in

from Japan Radio and Nagano Japan Ra-

tors and the persistently strong yen. In

New Japan Radio is heading back to prof-

come of ¥374 million, an improvement

grams for them in house. Sales of bipolar

Japan. In addition, we are stepping up

dio, which became part of the Group in

response, we made the decision to shift aitability owing to the success of businessof ¥668 million from the operating loss

plates for fuel cells were favorable, sup-the development of bipolar plates forthe fourth quarter of the previous fiscal

substantial amount of production to Thai

restructuring measures. We also forecast

incurred last year.

ported by growing sales of the residential

automotive applications to ensure ouryear. Japan Radio’s earnings are highly

subsidiary THAI NJR CO., LTD. We also

a rebound in demand and the emergence

The Great East Japan Earthquake

fuel cell system Ene-Farm in Japan. Ene-products become the industry standard

seasonal, as it generates half of its sales

launched an early retirement programof rebuilding demand at Japan Radio, as

had only a minimal impact on the sup-Farm has proved increasingly popularwhen fuel cell vehicles start appearing infrom public sector orders, which tend tothat attracted 391 applicants. As a result,public sector projects that were delayed

ply chain. In terms of earnings, however,in Japan since the earthquake amid agreater numbers from 2015.

be concentrated at the end of the fiscal

the business booked extraordinary losses

by the earthquake start coming on stream

the earthquake had a negative impact

move away from nuclear power toward

In electric double-layer capacitors,

year. As a result, the company typicallyof ¥4.8 billion for costs related to theseagain and orders emerge for land- andon functional chemicals due to a dropenergy efficiency and renewable energy.

we see potential for early adoption inreports losses in the first three quarters

steps to improve the business structure.

marine-basedin production in the automotive sector,

In functional chemicals, earnings grew

automotive applications that improveof the fiscal year then moves into profit

The second factor was a sharp decline

ment that was damaged in the disaster.

but a positive impact on bipolar plates

strongly on the back of new orders forfuel efficiency, such as in engine start-in the final quarter. This factor led to ain sales and profits at Japan Radio. The

However, we will continue to push ahead

for fuel cells in energy-related products.

high-performance plastic material Car-

stop systems and in energy regenerationstrong rise in profits in the electronics

lower sales reflected a winding down inwith restructuring in the electronics busi-

In chemical-related products, sales

bodilite, mainly from overseas customers

systems.

business in the previous fiscal year. In the

installations of digital terrestrial broad-ness in order to realize a fundamental

for bio-plastic applications.

of elastomer products declined due toharsh competition from overseas, but

Two factors had a major impact on

Thailand, but earnings were affected bydisruption to supply chains.

communications

equip-

In functional chemicals, we are add-

fiscal year under review, the electronics

casting equipment and adjustments or

improvement in its corporate structure. At

ing extra capacity to double production

business reported net sales of ¥169,907

delays to public sector orders following

Japan Radio, we will refigure the domestic

sales rose overall on the back of solid

Business Strategies and Outlook forof Carbodilite in response to rapid growth

million, up 50.6% from the previous fis-the Great East Japan Earthquake and ma-

manufacturing structure and develop thedemand for thermal insulation products

the Fiscal Year Ending March 2013

in the bio-plastic market. New markets forcal year, but an operating loss of ¥4,111

jor typhoons. Japan Radio reported a loss

business globally to shift the focus of sales

and carbon products.

We forecast ongoing sales and profit

Carbodilite are also opening up as more

million, a deterioration of ¥10,295 million

due to this large drop in sales.

from Japan to markets in Asia, particularly

In environment- and energy-related

growth in this business segment, as weapplications emerge, including as a modi-

year on year.

products, our electric double-layer ca-

expect the environment- and energy-

fier for photovoltaic panel materials, inthe electronics business were not dam-

We will also focus on achieving early

related market to continue expanding.

heat-resistant and heat dissipation metal

aged by the earthquake or the flooding inresults in new R&D projects related tosheets, and in interior and exterior vehicle

Segment Income(millions of yen)
500

Nisshinbo’s manufacturing facilities incoatings. For the fiscal year ending March

Segment Income

2013, we forecast sales of Carbodilite will

(millions of yen)emerging economies.

smart factories in the environmental
field and vehicle radars in the automotive field.

7,500

rise 50% year on year.

High-voltage direct
current system

5,000
0

2,500
0

-500

-2,500-1,000Urethane, etc.
Environmental &Energy Business

24

2010

2011

2012

403

561

937

-5,000Carbon bipolar plates

Japan RadioNew Japan Radio

2010

2011

2012

—

4,829

(2,791)(2,755)761(4,101)

(916)

(925)

(601)

Nagano Japan Radio

—

538

918

Others061

36

Ueda Japan Radio

82

340

556

Eliminations

1

9

1

Eliminations

19

(285)

1,307

(513)

(295)

374

(2,654)

6,184(4,111)

Total

Total

25

Overview of Business Segments

The Nisshinbo Group’s CSR Activities

Real Estate

Nisshinbo Holdings Inc.
Nisshinbo’s real estate business is active in the redevelopment of business property that has become idle as a result of
business changes by Group companies. It is also involved in the leasing of office and commercial facilities and the saleof residential building lots. The income is used as capital to launch new businesses and develop the Group’s global
operations. Many Group properties and facilities located throughout Japan have high asset values and have beenused for a wide range of purposes, including shopping centers and offices.

Summary of Financial Results for

Sales of lots at the former Nagoya Plant

values. By acting as the lead developer,

the Fiscal Year Ended March 2012site also got under way, and demand is

we can conduct integrated planning andIn the fiscal year ended March 2012, thestronger than expected for lots at thedevelopment of entire areas, making it

real estate business reported net sales

former Hamamatsu Plant site.

possible to build high-quality communi-

Corporate Principles of the Nisshinbo Groupties that take the environment and secu-of ¥9,082 million, down 27.0% fromthe previous fiscal year, and operating

Business Strategies and Outlook forincome of ¥6,743 million, down 33.8%.

the Fiscal Year Ending March 2013This mainly reflected a drop in revenues

The outlook for the domestic real estate

for the fiscal year ending March 2013

from sales of building lots in reaction

market remains unclear, but we expect

include the former plant sites in Harisaki,

to major redevelopment projects in the

profits to remain stable in the segment,

Nagoya and Kawagoe, as well as theprevious fiscal year, such as the sale ofas many tenant companies in our large

former company housing area at theland for public use. Revenues from land,

retail facilities operate premium stores

Hamamatsu plant site. At the Harisaki

office building and commercial facility

with sector-leading sales and profits. We

site, we will continue to release moreleasing were firm, with the Great East

project sales and profit growth in the fis-of the 227 lots that we began selling inJapan Earthquake having only a limited

cal year ending March 2013, supported by

the previous fiscal year. At the Nagoya

impact on operations.

stable revenues from property leasing andsite, we plan to offer different kinds

higher sales of residential building lots.

of property packages, including larger

In line with Challenge 2012, the

The Nisshinbo Group’s business activities are guided by three Corporate Principles: Public Entity,
Consistent Integrity and Innovation. The Group’s Corporate Philosophy is based on these principles. Guided by this Corporate Philosophy, Nisshinbo formulates a Medium-term Management
Plan to drive sustained growth.
These elements together comprise our vision for the Company and we are contributing tosociety through our efforts to realize this vision.

rity into consideration.
Redevelopment projects lined up

business continues to redevelop former

In the residential building lot sales

blocks containing multiple lots, in orderbusiness sites into residential building

business, we will continue to act as theto respond flexibly to market trends. At

lots. In the fiscal year ended March 2012,lead developer for site preparation work

the Hamamatsu site, we will start releas-

it began selling lots at the former Hari-and collaborate with housing builders

ing a total of 56 new residential lots. At

saki Plant site. The lots were released in

to subdivide and sell residential building

the Kawagoe site, we have teamed up

three phases and sold out immediately.

lots. Many of the properties that we own

with a leading housing developer to cre-

are located in urban areas close to train

ate 257 residential lots, which we plan tostations and therefore have high asset

start releasing in the current fiscal year.

Public Entity:

We shall contribute to human society through our business activities.

Consistent Integrity: We shall respond to stake holders with honesty and integrity.
Innovation:

We shall create the future through continuous innovation.

Corporate Philosophy of the Nisshinbo Group

Charters
Corporate Code of Conduct
Human Rights Charter
Environment Charter
Product Safety Charter

Medium-term Management Plan
We are implementing a three-year medium-term
management plan called Challenge 2012, ending
March 31, 2013.

Segment Income(millions of yen)
12,00010,000

Corporate Philosophy of the Nisshinbo Group8,000• As the eco-company, we shall contribute broadly toward enhancing the comfortable lifestyles and cultures ofpeople around the world.

6,000
4,000

• We shall aim to conduct business activities with honesty and integrity as our social responsibility based on the
belief that companies are public entity.

2,000• We shall constantly aim to raise corporate value and become a corporate group with a strong presence.

0

26

2010

2011

2012
27

Corporate Code of Conduct
The Nisshinbo Group is deeply aware that companies are public entity, and that, while they arebusiness entities pursuing economic aims such as the creation of added value through fair competition and the creation of employment opportunities, their mission is to widely contribute tosociety through their corporate activities. For that purpose, both domestically and internationally,
we shall respect human rights, observe related legislation and international rules and the spirit
behind them, and act on the basis of the following 10 principles toward the creation of a sustainable society with consistent integrity as our fundamental creed.

Corporate
Governance

Based on our belief that corporations are public entities, theNisshinbo Group adheres to its fundamental stance of always
acting with integrity and in good faith toward its stakeholders.
Reflecting this in our corporate governance activities, we work
to ensure the transparency of management, reinforce accountability and act ethically in all matters.
The Group’s Business Oversight and Execution Framework
The Company’s Board of Directors is responsible for making decisions on key management matters and for overseeing business execution by the directors. We havealso adopted a managing officer system in order to strengthen and separate decisionmaking and oversight functions and business execution functions.
The Executive Officers Conference, which is made up of directors, managing officers

1. Giving proper consideration to safety, we shall develop and supply socially beneficial products and services andobtain the satisfaction and trust of consumers and clients.

and other senior personnel, holds meetings to discuss important matters related tobusiness execution throughout the Group.

2. In a spirit of accountability, we shall engage in fair, transparent, and open competition and proper business
transactions. We shall also maintain sound and healthy relations with political and government organizations.

The Group’s Audit Framework

3. As well as with shareholders, we shall engage in wide-ranging communication with society and disclose corporate
information positively and fairly. We shall also endeavor to ensure the protection of personal information andclient information through proper data management.

Nisshinbo has established a Board of Auditors. The audit framework comprises the

4. We shall respect the diversity, character, and individuality of employees, ensure a safe and work-friendly
environment for them, and realize their comfort and affluence.

internal audits. These groups work closely together to improve corporate governance.

5. We recognize that efforts to address environmental problems are a common issue for humankind and an essentialcondition for the existence and activities of the Nisshinbo Group, and we shall take the initiative in this regard.

corporate auditors, who conduct audits, the independent auditor, who carries out accounting audits, and the Internal Audit Department, which is responsible for conducting
Nisshinbo also conducts oversight of specific areas such as workplace safety, environmental issues and IT systems.
Corporate Governance Structure
General Shareholders Meeting

6. We shall actively engage in social contribution activities as a good corporate citizen.
7. We shall resolutely resist any antisocial forces or organizations that pose a threat to the order and safety of civilsociety and shall have no links to such organizations.
8. Responding to the globalization of business activities, and complying with international rules and local
legislation, we shall engage in management that respects regional culture and customs, takes the interests of
the respective stakeholders into consideration, and contributes to the respective national and regional economic
development.

Board of Directors
Board of Auditors
Four Statutory Auditors(including two outside auditors)

Representative Directors

9. The top management of Nisshinbo Group companies recognizes that it is our duty to realize the spirit of thischarter and, by setting a good example, to effectively disseminate it throughout the Group and promote it
to business partners. Furthermore, we shall constantly monitor opinions both inside and outside the Group,
establish an effective in-house setup, and thoroughly imbue corporate ethics.
10. If a situation arises that appears to violate this charter, the top management of Nisshinbo Group companies shallmake clear both internally and externally our position of solving the problem and shall endeavor to investigate
the causes and prevent a recurrence. Furthermore, the top management shall execute the disclosure of speedy andaccurate information and accountability to the public and, after clarifying authority and responsibility, undertake
strict penalties, including upon ourselves.

28

Financial Auditors

11 Directors(including three outside directors)

Internal Audit Department
Executive Officers
ConferenceManaging Officers, Business Divisions, Group Companies
Representative Directors

Directors

Managing Officers

Representative directors are selected by resolutions of the Board of Directors. As of June
28, 2012, the president and senior executive
vice president were the Company’s two representative directors.

As of June 28, 2012, the Company had 11
directors, including three outside directors.
The Board of Directors is responsible formaking decisions on important management
matters and for monitoring the execution ofduties by directors. Directors are appointed for
one-year terms in order to clarify management
responsibility each fiscal year.

Nisshinbo has adopted a managing officer system to speed up decision-making for businessexecution and clarify operational responsibilities. As of June 28, 2012, the Company had 10
managing officers, including eight directors
with dual roles as managing officers. Managing officers are also appointed for one-year
terms.

29

1) Board of Auditors
The Company’s Board of Auditors comprises four statutory corporate auditors, twoof whom are outside auditors. In accordance with audit policy and plans determinedby the Board of Auditors, the corporate auditors monitor business management andRisk Management

In order to fulfill its corporate social responsibility by contributing to society through ongoing business activities, the Nisshinbo
Group has established systems to ensure stable operations by
mitigating a range of risks that could have a serious impact on
the smooth operation of the business.

execution at the Company and its subsidiaries by attending important management
meetings such as meetings of the Board of Directors and Executive Officers Conference

Crisis Management System

in order to understand operating conditions.

In order to mitigate and minimize risk and any potential losses, the Company has formulated Crisis Management Regulations covering the whole Group. It also conducts

2) Internal Audit Department

annual training exercises and inspections. Action plans have been created to respond

Nisshinbo has established an Audit Office independent from executive business func-

to any risk that impacts on the Group, while systems have been put in place to mini-tions to act as the Internal Audit Department. The Audit Office conducts ongoing audits

mize any losses. In the fiscal year ended March 2012, we overhauled some systemsof operations across the entire Nisshinbo Group and works to protect corporate assets

to ensure a more rapid emergency response in the event of a disaster. These changes

and increase management efficiency by providing advice and proposals for remedial

were made to eliminate a number of ambiguities that were identified during the Greatmeasures from a legal and rational standpoint. In the fiscal year ended March 2012, theAudit Office stepped up the oversight of Group subsidiaries overseas, which now play
an increasingly important role in the Group’s operations.

East Japan Earthquake.
An exercise to prevent leaks froman effluent treatment facility

1) Disaster Prevention System
Firefighting teams at each Group business site conduct regular drills to improve disaster

Timely Information Disclosure

prevention capabilities. These drills increase readiness for early-stage fires, life-saving

Nisshinbo is working to ensure it is accountable to all stakeholders in order to create asituations and potential emergencies such as gas or chemical leaks, and are developed

highly transparent business. In addition to fulfilling timely disclosure standards deter-

based on the type and location of each facility. Major business sites conduct annual

mined by the Tokyo Stock Exchange, we hold briefings for shareholders and investors

comprehensive disaster drills, which are reviewed by senior management, to ensure

on a regular basis and provide other timely information via our corporate website as

disaster prevention management activities remain at a high state of readiness. In thepart of ongoing efforts to improve the provision of information to stakeholders andfiscal year ended March 2012, managing officers inspected 14 business sites.

retain their trust.
An earthquake evacuation drill

Maintaining Internal Control Systems
Nisshinbo endeavors to create a healthy and highly transparent corporate culture inaccordance with the Corporate Principles of the Nisshinbo Group and the Corporate
Philosophy of the Nisshinbo Group. An internal control system has been established to
identify and then remedy any issues in business execution processes.

Global Corporate GovernanceCentralized Management of Operations in Asia

1) Internal Control System Reporting Related to Financial Reporting

In the fiscal year ended March 2012, we established two man-

The Financial Instruments and Exchange Law, which includes provisions on internal

agement companies in Asia to support business expansion incorporate control known as J-SOX, came into force in April 2008. Since then, we havethe region. The first management company, Nisshinbo Singa-

implemented control measures to maintain and upgrade our internal control systempore Pte. Ltd., will be responsible for providing financial andrelated to financial reporting. During the fiscal year ended March 2012, an assessment

internal control support to eight subsidiaries located in ASEAN

led by the Audit Office confirmed that the internal control system related to financial

countries such as Thailand and Indonesia. It will also train per-reporting is operating effectively.

Nisshinbo subsidiaries in ASEAN and China
Management companies
Overseas sites

Shanghai:
9 subsidiaries

China
Hong Kong:
4 subsidiaries

Thailandsonnel for the Group’s global operations. The second management company, Nisshinbo Business Management (Shanghai)Co., Ltd., will provide internal control and operational support

Singapore

Nisshinbo
Business Management(Shanghai) Co., Ltd.

to 22 subsidiaries in China.
Going forward, Nisshinbo will utilize these two subsidiaries
as business hubs in their respective regions to reinforce corpo-

Indonesia

Nisshinbo
Singapore Pte. Ltd.

rate governance from a global perspective and optimize theGroup’s operating structure.

30

31Corporate Ethics Reporting System

The Nisshinbo Group recognizes that one of its key corporate responsibilities is to ensure

Nisshinbo Group

Nisshinbo Holdings Inc.

Board of Directors

Initiatives to Protect Personal Information

Reportimportant information related to customers, suppliers, employees and other individu-

President

als is protected appropriately. In order to fulfill this responsibility, we handle personal
information in accordance with an internal privacy policy. In addition, internal audits are

Division subject to investigation
ReportInstructconducted based on company regulations to ensure systems are working properly, andInvestigate

Corporate Ethics Committee

steps are taken to prevent information leaks and realize ongoing improvements.

Initiatives to Ensure Information Security
The Nisshinbo Group is constantly reinforcing information security measures to prevent
leaks of personal information about customers and other sensitive information.

External Contact Point

Internal Contact Point(Corporate Ethics Committee)
Response(Disclosed whistleblower)

Nisshinbo widely uses anti-virus software and programs to remedy security issues in

Coordinate(Corporate Attorney)

Promote Groupwide
understanding

Group companies

Report, consult(Disclosed / undisclosed whistleblower)

Stakeholders

its IT systems in order to prevent computer viruses from causing leaks of sensitive data.
Steps are also being taken to tighten access to IT systems to prevent and limit leaks of
information caused by internal unethical actions.

Corporate Ethics Reporting System

We have also formulated information security guidelines, which are used as a check-

The Nisshinbo Group has established a Corporate Ethics Reporting System to rapidly iden-list by Group companies in Japan and overseas to conduct their own inspections oftify and prevent any reoccurrence of potential or actual legal violations. Group employees

information security systems.

and external parties can submit reports to the system, which can be used to communi-

In addition to the above measures to protect IT systems, we are making continu-

cate directly with the Corporate Ethics Committee or an outside corporate attorney. Everyous improvements to the protection of personal information and management of tradeeffort is made to protect those who have used the system from unfair treatment.

secrets through annual internal audits.

If the Corporate Ethics Committee receives a report via the system, it convenes ameeting, launches an investigation and takes appropriate action where necessary. If theComplianceoutside corporate attorney receives a report, appropriate action is taken based on close

Guided by its principle of “consistent integrity,” the Nisshinbo
Group believes it is important to act with fairness and integrity
and to contribute to society through its business activities. We
have therefore formulated the Nisshinbo Group’s Corporate
Code of Conduct. In order to realize the objectives of this Corporate Code of Conduct, the Nisshinbo Group has also createdCompliance Guidelines that clearly define the behavior Nisshinbo employees are expected to follow, as part of wider efforts toenforce compliance.

cooperation with the Corporate Ethics Committee. Important matters are immediately
reported to the president.
In the case of reports received from individuals who have provided their name andcontact details, the Corporate Ethics Committee provides information about how thematter is being dealt with, such as updates on the investigation and a summary of its
conclusions. The Corporate Ethics Committee also works to prevent any future violationsof law or corporate ethics by providing information to all companies in the Group about
its response to the issue based on the results of the investigation.

Compliance Education
In order to promote wider understanding of corporate ethics, the Nisshinbo Group con-

Corporate Ethics Committee

ducts compliance training for different employee levels and work sites. Compliance is also

Nisshinbo has established a Corporate Ethics Committee that answers directly to thepart of the curriculum for new employee orientation courses.

president. The committee is led by a director with a dual role as a managing officer,

The Employee Handbook, which is used as a tool in training programs, includes infor-

who is responsible for handling all compliance matters across the Nisshinbo Group.

mation about corporate ethics, such as the Nisshinbo Group’s Corporate Code of Conduct

Specifically, the Corporate Ethics Committee is responsible for (1) implementing

and Compliance Guidelines, in order to educate and enlighten employees about the impor-corporate ethics systems and regulations, (2) deciding the content and methods oftance of compliance.

corporate ethics training for employees, and (3) formulating and implementing investigations, responses, procedures and remedial measures related to consultations andreports received through the Company’s Corporate Ethics Reporting System.

The Employee Handbook is available in both Japanese and English, and it plays an
Employee Handbook

effective role in compliance training at overseas subsidiaries. The handbook is beingtranslated into other languages for use at overseas subsidiaries where English is not the
local language.

32

33

Board of Directors (As of June 28, 2012)

Financial Section

Director,*1
President

Director,*1
Senior Executive Vice President

Director,
Senior Executive Managing Officer

Director,
Senior Executive Managing Officer

Shizuka Uzawa

Yoshihito Onda

Masaaki Isobe

Masaya Kawata

Director,
Executive Managing Officer

Director,
Managing Officer

Director,
Managing Officer

Director,
Managing Officer

Masahiro Murakami

Nobuyuki Hagiwara

Koji Nishihara

Hiroshi Nakano

P36
P41
P42
P44
P45
P46
P47
P48
P57

Management’s Discussion and Analysis
Six-Year Summary
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Independent Auditors’ Report*1 Representative director*2 Outside director

Director*2

Director*2

Director*2

Tomofumi Akiyama

Noboru Matsuda

Yoshinori Shimizu

Managing Officers and Auditors (As of June 28, 2012)
President

Executive Managing Officer

Shizuka Uzawa*

1

Masahiro Murakami*

Senior Executive Vice PresidentManaging Officer

Yoshihito Onda*

Nobuyuki Hagiwara*1
Koji Nishihara*1
Hiroshi Nakano*1
Toshihiro Kijima
Kazunori Baba

1

Senior Executive Managing Officer

Masaaki Isobe*1
Masaya Kawata*1

34Standing Statutory Auditor
1

Yoshio Ide
Masao Satsuka
Statutory Auditor

Yo Kawakami*2
Toshihiko Tomita*2*1 Board member as well
*2 Outside auditor

35

Management’s Discussion and Analysis
CURRENT BUSINESS STRATEGIES AND FUTURE PROSPECTSHIGHLIGHTSThe Nisshinbo Group is targeting net sales of more than ¥600

ability in the precision instruments business and reinforce thebillion and ROE of over 9% as long-term performance goals toautomobile brakes business following the acquisition of TMD.

be achieved by the fiscal year ending March 2018. Guided by

In the electronics business, we are currently implementing a• The Nisshinbo Group became the world’s leading maker of automotive brake friction materials with the acquisition of TMD Friction Group S.A. in November 2011.

the key words, environment, energy and globalization, we will

far-reaching business restructuring program on a global level

work to attain these numerical goals by actively developingat New Japan Radio Co., Ltd. By making similar improvements• In the fiscal year ending March 2013, the final year of Three-Year Management Plan Challenge 2012, Nisshinbo is taking an aggressive business approach by working to create and expand new businesses and explore M&A targets.

and reinforcing new and existing businesses and conducting

to the operating structures of Japan Radio and other subsidiar-

M&A in line with the objectives of Challenge 2012, our three-ies, we plan to rebuild and reinforce the operating base in theyear management plan, which is now in its final year.

electronics business. In the precision instruments business, we• The impact of the Great East Japan Earthquake, the debt crisis in Europe and yen appreciation combined to makeeconomic conditions challenging in the fiscal year ended March 2012.

OPERATING RESULTS

Following on from the consolidation of Japan Radio andare targeting a recovery in profits. We plan to achieve this by

Nagano Japan Radio as subsidiaries in 2010, we acquired Eu-

reducing losses on photovoltaic module manufacturing equip-

ropean brake friction material maker TMD in November 2011,

ment by cutting costs further and restoring price competitive-

Overview

gible assets such as technical expertise, and ¥23,056 million in

making it a subsidiary. This acquisition represented anotherness, and by expanding overseas operations and boosting

During the fiscal year ended March 2012, the global economy

goodwill. These amounts were based on a market value assess-major step toward our goal of shifting the Group’s focus to-of yen)400
profitability
in the plastic molding and processing(billions
business,3

saw a continued moderate recovery in the U.S. and Asia, but

ment of TMD’s assets and liabilities in accordance with Japaneseward the environment and energy fields and globalizing op-

which is performing well at the moment.

2

conditions in Europe deteriorated as the sovereign debt crisis

accounting standards related to business combinations. TMD’s

erations. In the fiscal year ending March 2013, we will create

escalated. The European economy faces the risk of further

results will be reflected in consolidated earnings from the firsta growth strategy with a particular focus on the expanding

profits as the redevelopment of former plant sites in Harisaki,

weakness going forward due to the impact of the uncertain

quarter of the fiscal year ending March 31, 2013.

markets of Asia, in line with our goal to develop our global

Kawasaki and elsewhere gains momentum.

business. At the same time, as an eco-company, we will work

100 Finally, in the automobile brakes business, we forecast a

fiscal outlook on financial markets and persistently high unemployment. Conditions in the Japanese economy remained300

In the real estate business, we forecast a sharp rise in

Results of Operations in the Current Term andComparison with the Previous Termto rapidly launch new businesses in the environmental and en-large rise in sales owing to the consolidation of TMD, but anergy fields and radically restructure existing businesses to shift

0increasein goodwill amortization expenses and other costs is

accident, and the subsequent impact of power shortages.

Net sales totaled ¥379,340 million (US$4,742 million), up

our strategic focus.

likely to weigh on profits in the near term. In the second half

However, there was a moderate pickup in the economy on the

16.5% year on year owing to a full year of earnings from Ja-

For the fiscal year ending March 2013, our main objec-

back of a recovery in production activity as supply chains were

pan Radio Co., Ltd. and Nagano Japan Radio Co., Ltd., whichtives will be to rebuild the electronics business, restore profit-

restored. Nevertheless, the economic outlook remains unclear

became part of the Group in the fourth quarter of the previ-

due to factors such as the strong yen and high crude oil prices.

ous fiscal year. However, operating income declined sharply to

Net Sales (millions of yen)

Against this backdrop, we developed and reinforced new¥4,170 million (US$52 million), a drop of 79.0% year on year,

Textiles

60,964 up 6.2%

and existing businesses and actively conducted M&A as part ofreflecting a weak performance by subsidiaries in the electronics

Automobile Brakes

47,450 up 2.9%

our strategy to develop our global business. In November 2011,

business, earnings deterioration in the precision instruments

Papers30,220 down 0.3%

we acquired TMD Friction Group S.A. (TMD), a European maker(billionsof yen)businesscaused by poor sales of photovoltaic module
manu400

300

Precision Instrumentsof brake friction materials. This acquisition transformed thefacturing equipment, and a lack of major property develop-

Chemicals

8,258 up 13.4%

Nisshinbo Group into the world’s leading maker of automobile

300 in the real estate business.
ments

250
200

Electronics

169,907 up 50.6%

brake friction materials, with a global share of over 15% (based200

Although ordinary income declined and a number of fac-

150

on our research). In order to transform the Nisshinbo Group into

tors weighed on profitability, including an increase in extraor-

a global organization, we also established regional subsidiaries

dinary100 losses related to restructuring in the electronics businessin Singapore and China (Shanghai) to support rapid business(special retirement benefits), the effective tax rate declined, as

50

expansion in the Asia economic region.

0
historical
writedowns booked for valuation losses on subsidiary

0

07

08

09

10

11

12

100

25,191 down 21.3%

Real Estate

9,082 down 27.0%

Other Businesses

28,268 up 4.1%

1200

difficult due to the Great East Japan Earthquake, the nuclear(billions of yen)

2

07

08

09

10

11

1

12

of the fiscal year, we also expect the business to incur costs
related to the start up of a new subsidiary in China.
Operating Income (Loss) (millions of yen)
20

(billions of yen)

840 up 356.5%
4,254 down 16.4%

15

260 an improvement of ¥407 million(1,070) a deterioration of ¥2,483 million

10374 an improvement of ¥668 million(4,111) a deterioration of ¥10,295 million

56,743 down 33.8%
007

651 up 53.9%

08

09

10

11

12

Note: Changes in net sales and operating income (loss) are year-on-year figures; please refer to pages 20 to 26 for details on performance in individual segments.

07

08DIVIDEND
09
10

11

12

The Group’s consolidated balance sheets as of March 31,

shares are likely to be included in tax deductible expenses. As

2012 also reflected the financial position of TMD at the end of

a result, net income fell only 15.8% year on year to ¥9,416

Recognizing its responsibility to pay shareholders a stable divi-

Cash Dividends

the fiscal year. In addition, we booked ¥9,353 million in intan-

million (US$118 million).

dend, Nisshinbo Holdings Inc. paid a full-year dividend of ¥15.0

20

(yen)

per share for the fiscal year ended March 2012. Nisshinbo will

Net Sales

Operating Income

400(billions of yen)

300

15

200

10

100
0

36

20

5
07

08

09

10

11

12

0

maintain its basic policy of paying ¥15.0 per share while work-

300(billions of yen)(billions of yen)250

dividends in response to growth in earnings.

20

200

0

10

100

10
5

15

150

07

08

09

10

11

12

5

50
0

(billions of yen) by flexibly increasing
ing to distribute profits to shareholders

25

15

07

07
08

08
09

09
10

10
11

11
12

12

0

07

08

09

10

11

12

600
500

(billions of yen)

37

100

100

50

0

07

08

09

10

11

400

0

12

07

08

09

10

11

12

(billions of yen)

200
150

200
100

growth, and into upgrading manufacturing equipment to raise

ics business, ¥2,988 million in capital expenditures was mainly

Net assets at the end of the fiscal year totaled ¥213,751

product quality. It also invests in environmental initiatives such

spent on semiconductor manufacturing and R&D facilities at

in assets were ¥13,301 million in notes and accounts receiva-

15
million (US$2,672
million), an increase of ¥2,194 million fromas the reduction of greenhouse gases and in manufacturing

New Japan Radio.

ble–trade, ¥12,887 million in property, plant and equipment,

the end of
10the previous fiscal year. This primarily reflected an

facilities in Southeast Asia in response to rising demand driven

and5 ¥24,116 million in goodwill.

increase in retained earnings of ¥6,983 million and a decline inby market expansion.

07

5

foreign currency translation adjustments of ¥4,679 million.

08

09

10

11

12

0

20

0 of the above, the shareholders’ equity ratio deAs a result
07

08

09

10

11

clined 3.3 percentage points year on year to 34.7%.

12

15

CASH FLOWSCash Flows from Operating Activities¥43,361 million in cash acquired from newly consolidated sub-

(yen)
Cash
20 flows provided by operating activities totaled ¥12,974 mil-sidiaries, net
20 of payment for purchase of companies.

lion (US$162 million), mainly reflecting income before income

10provided by financing activities totaled ¥16,835 milCash flows

lion for the payment of special retirement benefits.

lion (US$210
5 million), mainly reflecting cash provided of ¥49,492

08

09

10

11

09

10

11

07

08

09

10

11

12

to close certain business sites and subsequently use the idle land.

12

10
5

300

100

100

50

0

0

80

(billions of yen)

(yen)

0

60

20
0
-10

600
07

08
07

09
08

10
09

11
10

12
11

12

(billions of(%)yen)
Year-on-Year Change

43,752
42,79526,94523,262
6,517
179,483
322,754

4.4
4.7
-0.5
-21.6
3.4
55.1
23.3

15
10
5
0

15

5

0

new products and the formation of new markets may not pro-

Risks
Associated with Product Quality-5

ceed as anticipated. This could delay or prevent the recovery of

The majority of the Nisshinbo Group manufactures products

prior investments.

in accordance with international quality control standards, but

07

08

09

10

11

12

07

08

09

10

11

12

there is no guarantee that quality-related problems will not oc-

Amount(millions of yen)25
20

inherent in new businesses and the development of appealing

40

Production results in each segment for the fiscal year under review were as follows:

012

could impede redevelopment work.

08

PRODUCTION RESULTS

511order to expand sales and profits. However, uncertainties are

07

500

Notes: 1.
based
manufacturingcosts.
07Amounts
08are calculated
09
10 on 11
12
07
08
09
10
11
12
2. The real estate business does not engage in manufacturing, and therefore the above amounts do not include any amounts from this segment.
3. The above amounts do not include consumption taxes.
4. Production results for the electronics business in the fiscal year ended March 2012 increased sharply owing to a full-year contribution from Japan Radioand Nagano Japan Radio, which were consolidated on December 29, 2010.

38

Risk of Fluctuation in the Value ofInvestment Securities

cur in the future. The Company has product liability insurance,

Investment securities held by Nisshinbo are(billions
markedto marketof yen)impacton the Group’s financial results.
80

in accordance with accounting standards for financial products,

but the occurrence of a large liability could have an adverse(yen)even stricter internal standards for a portion of these securities.

60
Risks
Associated with Market Shifts Relating to
Product Sale Prices and Raw Material Procurement300

Based on current accounting standards and standards for asset

Some of the Nisshinbo Group’s products can be significantly

200

impairment, there is a limited possibility that impairment losses

20
affectedby fluctuations in market prices owing to market de-100

will have an impact on net income, as the acquisition cost ofvelopments and competition with other companies. Sales prices0

the investment securities was low. However, comprehensivefor-10 textile and paper products and raw materials procured by

400

10

0

10

of this land may result in cleanup expenses and revisions to laws

200

TextilesAutomobile Brakes
PapersPrecision Instruments
ChemicalsElectronics
Total

and Saeron Automotive Beijing Co., Ltd.; and ¥1,106 million in

10 contribution to the Company’s profits. The redevelopment
cant

150

(billions of yen)5such as electric double-layer capacitors and carbon catalysts in

300

Industry Segment

at consolidated subsidiaries Saeron Automotive Corporation

The Nisshinbo Group is actively developing new businesses

200

12

10

Income from these redevelopment projects is providing a signifi-

400

12
11

15

Risks Associated with New Businesses

250

11
10

20

Machinery Plant; ¥1,008 million in the automobile brakes business to upgrade brake friction material manufacturing facilities(billions of yen)

15

-5

500

10
09

12

To
steps
(billions ofyen)
20reform its business structures, Nisshinbo is taking active

Equity

09
08

11

25

generating equipment at the Tatebayashi Plant and the Miai

09

10

20

of ¥28,659 million from the end of the previous fiscal year.

08
07¥887 million in the real estate business to install solar power

08

09

Capital Expenditures(billions of yen) amountIn the fiscal year under review, capital expenditures

07

08

Risks Associated with the Utilization of Idle Landthe fiscal year totaled ¥16,904 million (US$211 million), a decline

07

07

tion available to the Nisshinbo Group as of March 31,(yen)2012.

million for the purchase of property, plant and equipment and(billions of yen)(billions of yen)

12

Forward-looking statements in this report are based on informa-

As a result of the above, cash and cash equivalents at the end of

600

11

repayment of long-term debt of ¥31,734 million.

(US$723 million), primarily reflecting cash used of ¥14,580

Total Assets

10

RISK INFORMATION

0

12

09

million from proceeds from the issuance of long-term debt, versus

0 flows used in investing activities totaled ¥57,861 million
Cash
07

0

15

amortization of ¥14,550 million, and cash used of ¥7,274 mil-Cash Flows from Investing Activities

08

the precision instruments business to establish a new plant andCash Flows from Financing Activities

55(billions of yen)

15 and minority interests of ¥3,031 million, depreciation and
taxes
10

07

ed to ¥15,705 million (US$196 million). This mainly comprised

10

15

0
sidiary
Nisshinbo Mechatronics (Thailand) Ltd. In the electron-¥37,221 million
in long-term debt.
20

the end of the previous fiscal year. This was mainly due to20

priority product fields that offer the potential for long-term

million from the end of the previous fiscal year. This increase0
million(US$4,010 million), an increase of ¥52,538 million from

050
plastic
molding and processing facilities at consolidated sub-25 million in commercial paper, and an increase (billions
trade, ¥2,000of of yen)

Total liabilities at the end of the fiscal year were ¥320,833

100

The Nisshinbo Group channels its capital expenditures into

increases of ¥4,200 million in notes and accounts payable—

10

200

100

of yen)20¥534,584
million (US$6,682 million), an increase of(billions¥54,732

15300

CAPITAL EXPENDITURES

Total assets at the end of the fiscal year under review stood at

mainly reflected the consolidation of TMD. The main increases

400(billions of yen)

250

300

FINANCIAL POSITION

300

and the Company implements impairment accounting based on

07 may 08
09significantly
10
11
12 changes in market
incomefluctuate
owing tovalue. Also, the Company plans to limit increases in interest-40

0

07 as cotton,
08
09 steel
10 and 11
12
the Group such
pulp,
other materials
areparticularly susceptible to these market trends.

bearing liabilities by selling investment securities to procure

The New Japan Radio Group (New Japan Radio Co., Ltd. andcapital needed for mergers and acquisitions, overseas businessits consolidated subsidiaries) generates more than 80% of its

development, and capital investment, but misalignment of theconsolidated sales from semiconductor devices. Significant fluc-timing between sale and investment may give rise to unfore-

tuations in demand in the semiconductor market may therefore

seen circumstances.

have a large impact on the Nisshinbo Group’s financial results.

39

20

(yen)

20

(billions of yen)Six-Year Summary(millions of yen)

Risk Associated with Fluctuations in
Exchange Rates

Risks Associated with Financial Covenants
Related to Capital Procurement

The Nisshinbo Group imports raw materials such as cotton and

The Nisshinbo Group has secured funding from multiple fi-

pulp. An inability to reflect changes in exchange rates in prod-nancial institutions. The Company and some consolidated

uct prices may put pressure on profits.

subsidiaries have entered into commitment line contracts, while

Some of the Group’s business transactions are denominated

2007
400
300

consolidated subsidiary New Japan Radio has entered into ain foreign currencies. While the Group takes steps to mitigate

term loan contract and consolidated subsidiary TMD Friction

the risk of exchange rate fluctuations, not all this risk can be

Finance S.A. has issued corporate bonds. These companies are

avoided. Fluctuations in exchange rates may therefore affectbound by certain financial covenants.

200
100
0

the Nisshinbo Group’s financial results, with phases of yen appreciation putting pressure on profits.

Operating Income

11,551

12,034408

3,570

19,8434,170

Net Income (Loss)

15,107

12,290(1,286)

1,896

11,1859,416

Equity282,015

245,909100

193,698

193,639

211,557

213,751

Total Assets

472,670

424,706 50

366,858

358,110479,852

534,58455.3

53.0 049.0

Shareholders’ Equity Ratio (%)
07

08

09

10

11

09

38.0

10

11

34.7

12

(0.6)

1.0

6.1

5.1

Payout Ratio (%)*

35.6

—

—

167.7

27.5

36.1

18,30624,28016,872

13,027

12,800example, rapid developments in specific parts supply regions

Capital Expenditures(billions of yen)

300

20
15

200

10

Risks Associated with Disasters and Accidents

these laws. However, unforeseen revisions to laws and regula-

The Nisshinbo Group takes
100 steps to manage risk related totions may limit the Group’s business activities and lead to an

disasters and accidents. However, a large earthquake or otherincrease in costs.

major disaster or a sudden0accident suchfire may09
cause 10
sig07 as a 08

5
11

0

12

300
Depreciation and Amortization(billions of yen)(billions of yen)

14,984

16,890250

25

15,705(billions of yen)

14,55018,025

12,96013,158184,098,939

184,098,939

178,798,939

178,798,939

10.38

63.32

53.83

20

Common Shares Issued
200

201,698,939

198,698,939

150

Per Share (in yen):

Net Income (Loss)
50
Shareholders’Equity007

07
08

Cash Dividends

15

10

100

08
09

09
10

10
11

Risks Associated with Changes inCustomer Business Performanceto the suspension of production activities that causes shipment
delays. The Group may also incur considerable costs to restore

Number of Employees

The customers of the Nisshinbo Group’s automobile brakes busi-

damaged buildings or facilities.

*Payout Ratio is on a non-consolidated basis.

74.19

63.34 5(7.08)

1,301.14

1,179.43 0985.19

15.00

15.00

15.00

15.00

15.00

15.00

12,744

13,253

12,726

12,48818,292

22,304

11
12

12

07

1,034.04

08

09

1,036.80

10

11

12

1,063.19

In addition, the outbreak and spread of a new infectious
20 on the Group’s operations.
disease may have an impact(billions of yen)

20
15

15

10

10

5

5

concentrated toward the end of the fiscal year. In addition,0

tal expenditure in the telecommunications sector may affect the

07

08

09

10

11

0

12

25

Risks Associated with Overseas
Business Development(yen)(billions of yen)Net
20 Sales(billions of yen)

10

20

Risks inherent to this international presence include unforeseen
15
10

200
5

0

150

-5

100

0
100 07

08
07

09
08

10
09

11
10

12
11

12

07

08

09

10

11

12

0

500

15
20
10

(billions of yen)

100
07

08

09

10

11

12

0

10
0

0

07

0

08
07

09
08

10
09

11
10

12
11

80
60
40

15
5

-5
5 07

50

12

Net Income (Loss) per Share

20

200

5

(billions of yen)

250
200

600

300

300

5

(billions of yen)(billions of yen)

400

(billions of yen)

300
10

Net Income (Loss)
(yen)

20
15

400
15

0

Group’s financial results.

nomic factors and social turmoil.

51.1

08

5.1

established clear internal regulations regarding compliance withchanges in laws and regulations, unfavorable political or eco-

07

5.7

ing to sharp increases in the price of components.

The Nisshinbo Group owns many production bases overseas.

150

1.9

These laws include export restrictions, import regulations andtrends in central and local government spending plans and capi-

12

200

2.7

Group’s shipment plans or lead to deterioration in margins ow-

ness with central and local governments, so sales tend to be379,3400.5

laws and regulations governing areas such as national security.

The Japan Radio Group has a relatively high ratio of busi-

325,555(0.3)

400
nies and lead to delivery
delays. This in turn could impact thesequently may have an impact on the Group’s financial results.

242,409

2.7

Ltd. and its consolidated subsidiaries) are subject to a range ofcompanies are factors outside the control of Nisshinbo, and con-286,167(billions of yen)

3.1

and product fields may affect supply capacity at parts compa-

prices owing to changes in the business results of such client

250

2012

2011

Return on Equity (%)

Products supplied by the Japan Radio Group (Japan Radio Co.,bally. The cancellation of contracts or requests to sharply reduce

322,4122010

The Group may face difficulties in securing necessary components owing to changes in the economic environment. For

ness are automobile manufacturers that conduct business glo-

2009

300

Risks Associated with Supply Chainnificant damage to the Group’s manufacturing facilities, leading

40

312,825

Net Sales

2008

Return on Assets (%)

Risk Associated with Unforeseen
Revisions to Laws and Regulations

environmental and recycling laws. The Japan Radio Group has(billions of yen)

08
07

09
08

10
09

11
10

12
11

12

07

08

09

10

11

12

(yen)

25

(billions of yen)

20

20

15

0
-10

10
5 07
0

08
07

09
08

10
09

11
10

12
11

12
41

Consolidated Balance Sheets(March 31, 2012 and 2011)ASSETS

2012(millions of yen)(thousands of
US dollars) (Note 1)

2011

2012

Current assets:
Cash and cash equivalents
Time deposits (Note 5)
Marketable securities (Note 4)(millions of yen)(thousands of
US dollars) (Note 1)

2012

2011

2012

Short-term bank loans (Note 5)¥26,929¥25,494$336,613

LIABILITIES AND EQUITYCurrent liabilities:¥16,904¥45,563$211,300

3,995

1,313

49,937

Commercial paper

27,00025,000337,500

163

160

2,038

Current portion of long-term debt (Note 5)

20,62523,854

257,813

Notes and accounts payable, trade (Note 5)

58,97054,770737,125

Unconsolidated subsidiaries and affiliates

562

278

7,025

PayablesReceivables
Notes receivable, trade (Note 5)

13,226

13,129165,325

Accounts receivable, trade (Note 5)

111,122

97,918

1,389,025

224

1,589

2,800

Unconsolidated subsidiaries and affiliates
Other

4,895

3,123

61,188129,467

115,759

1,618,338

9,757

7,699

121,962

69,28962,747866,112

Accrued expenses

11,867

8,790

148,337

Accrued income taxes

2,170

1,662

27,125

Other

(856)

(478)

(10,700)

Deferred tax liabilities (Note 7)

628

54

7,850

128,611

115,281

1,607,638

Other current liabilities (Note 5)

10,431

9,284

130,387

Total current liabilities

168,939

156,885

2,111,737

Inventories (Notes 3 and 5)

81,60374,5281,020,038

Deferred tax assets (Note 7)

5,297

3,057

66,212Long-term debt (Note 5)

62,19924,988

777,488

Accrued severance benefits (Note 6)

43,342

41,783541,775

Deferred tax liabilities (Note 7)

26,972

26,835337,150

Other long-term liabilities (Note 5)

19,381

17,804242,262

151,894

111,410

1,898,675

27,58827,588344,850

20,401

20,401

255,013

246

203

3,075

Retained earnings

140,213133,230

1,752,663

Net unrealized gain on available-for-sale securities

15,344

13,430191,800

Less allowance for doubtful accounts

Other current assets (Note 5)

3,028

1,775

37,850Total current assets

239,601

241,677

2,995,013

Property, plant and equipment (Note 5):Land54,97356,194

687,163

Buildings and structures

165,866

160,834

2,073,325

Machinery, equipment and tools

271,415254,941

3,392,687

3,417

2,247

42,712495,671474,216

6,195,887(332,846)(324,278)(4,160,575)

162,825

149,938

2,035,312

Construction in progress
Less accumulated depreciation

Long-term liabilities:

Commitments and contingencies (Note 11)

Equity (Note 12):
Common stock:
Authorized—371,755,000 shares
Issued2012 and 2011—178,798,939 shares

Capital surplus
Stock acquisition rights

Deferred loss on derivatives under hedge accounting
Investments and other assets:

Foreign currency translation adjustments

Investment securities (Notes 4 and 5)

56,70657,909708,825

Investments in and advances to unconsolidated subsidiaries and affiliates

17,177

13,972214,713

2012—4,107,359 shares

Deferred tax assets (Note 7)

5,395

5,237

67,438

2011—2,892,315 shares

Goodwill

25,341

1,225

316,762

Other

27,5399,894

344,237

(11)

(76)

(138)

(14,280)(9,601)(178,500)(3,522)—(44,025)

Less shares in treasury

Minority interests—(2,591)—

185,979

182,584

2,324,738

27,772

28,973

347,150

132,158

88,237

1,651,975

213,751

211,557

2,671,888¥534,584¥479,852$6,682,300¥534,584¥479,852$6,682,300

See Notes to Consolidated Financial Statements.

42

43

Consolidated Statements of Income

Consolidated Statements of Comprehensive Income(Years ended March 31, 2012 and 2011)(Years ended March 31, 2012 and 2011)(millions of yen)

Net sales(thousands of
US dollars) (Note 1)

2012

2011

2012

¥379,340¥325,555$4,741,750(millions of yen)(thousands of
US dollars) (Note 1)

2012

2011

2012

¥6,351¥13,443$79,388

Net unrealized gain (loss) on available-for-sale securities

1,522(3,570)19,025

Deferred loss on derivatives under hedge accounting

65

7

813

(4,623)(4,374)(57,788)

Income before minority interests
Other comprehensive income:Costs and expenses:
Cost of sales

317,534

262,067

3,969,175

Selling, general and administrative expenses

57,636

43,645

720,450

375,170

305,7124,689,625

Operating income

Foreign currency translation adjustments
Equity in loss of affiliates

(115)

(145)

(1,438)(3,151)(8,082)(39,388)¥3,200¥5,361$40,000

4,170

19,84352,125Interest and dividend income

1,888

1,757

23,600Parent¥6,888¥3,467$86,100

Interest expenses(1,099)(832)(13,737)

Minority interest¥(3,688)¥1,894$(46,100)

Equity in earnings of affiliates

3,502

3,348

43,775

Other, net (Note 10)(5,430)(3,580)(67,875)(1,139)693(14,237)

3,031

20,53637,888Current

2,718

2,430

33,975

Deferred(6,038)

4,663(75,475)(3,320)

7,093(41,500)

6,351

13,44379,388Comprehensive income:

Other income (expenses):

Income before income taxes and minority interests

Comprehensive income

See Notes to Consolidated Financial Statements.

Income taxes (Note 7):

Income before minority interests
Minority interests (loss) in net income(3,065)

2,258(38,312)Net income¥9,416¥11,185$117,700(yen)(US dollars)

Net income¥53.83¥63.32$0.67

Cash dividends

15.00

15.00

0.19

Per share:

See Notes to Consolidated Financial Statements.

44

45

Consolidated Statements of Changes in Equity

Consolidated Statements of Cash Flows(Years ended March 31, 2012 and 2011)(Years ended March 31, 2012 and 2011)2012
Common stock:
Balance at beginning of year
(2012—178,798,939 shares and 2011—184,098,939 shares)
Balance at end of year
(2012 and 2011—178,798,939 shares)(thousands of
US dollars) (Note 1)

2011

2012

¥27,588¥27,588$344,850¥27,588¥27,588$344,850

Capital surplus:
Balance at beginning of year
Balance at end of year

¥20,401¥20,401¥20,401¥20,401$255,013$255,013

Stock acquisition rights:
Balance at beginning of year
Net changes
Balance at end of year

¥203
43
¥246

¥156
47
¥203

$2,538537$3,075¥133,230
9,416(2,630)
(27)
141
0
83
¥140,213¥129,584
11,185(2,672)558—(5,422)(3)¥133,230$1,665,375
117,700(32,875)
(338)
1,763
0
1,038
$1,752,663

Retained earnings:
Balance at beginning of year
Net income
Cash dividends
Adjustment due to increase in consolidated subsidiaries
Adjustment due to increase in affiliates accounted for by the equity method
Retirement of treasury stock
Other
Balance at end of year
Net unrealized gain on available-for-sale securities:
Balance at beginning of year
Net changes
Balance at end of year
Deferred loss on derivatives under hedge accounting:
Balance at beginning of year
Net changes
Balance at end of year

¥13,430
1,914¥15,344¥17,092(3,662)¥13,430$167,875
23,925$191,800

¥(76)
65
¥(11)

¥(82)
6
¥(76)

$(950)
812$(138)

Foreign currency translation adjustments:
Balance at beginning of year
Net changes
Balance at end of year¥(9,601)(4,679)¥(14,280)¥(5,538)(4,063)¥(9,601)$(120,013)(58,487)$(178,500)

Treasury stock at cost:
Balance at beginning of year
Add: acquired
Add: increase in the consolidated subsidiaries
Deduct: sold and retirement
Balance at end of year¥(2,591)(931)—
0¥(3,522)¥(6,053)(30)(1,931)
5,423¥(2,591)$(32,388)(11,637)—
0$(44,025)

Minority interests:
Balance at beginning of year
Net changes
Balance at end of year
See Notes to Consolidated Financial Statements.
46(millions of yen)

¥28,973(1,201)¥27,772¥10,491
18,482¥28,973$362,163(15,013)$347,150

Cash flows from operating activities:
Income before income taxes and minority interests
Adjustments to reconcile net income to net cash provided by operating activities:
Income taxes—paidDepreciation and amortization
Amortization of goodwill
Equity in earnings of affiliates
Provision for (reversal of) doubtful receivables
Provision for accrued pension and severance benefits
Payment of accrued pension and severance benefits(Gain) loss on sale of property, plant and equipment
Impairment of long-lived assets(Gain) loss on sale of investment securities and investments in and advances
to unconsolidated subsidiaries and affiliates
Loss on write-down of investment securities and investments in andadvances to unconsolidated subsidiaries and affiliates
Loss on plant closures
Loss due to increase in the Company’s share of the affiliate accounted
for by the equity method
Other
Changes in operating assets and liabilities:
Receivables
Inventories
PayablesOther, net
Net cash provided by operating activities
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment
Proceeds from sale of investment securities and investments in and advances
to unconsolidated subsidiaries and affiliates
Payment for purchase of property, plant and equipment
Payment for purchase of investment securities and investments in andadvances to unconsolidated subsidiaries and affiliates(Increase) decrease in time deposits
Cash acquired from (paid for) newly consolidated subsidiaries, net of payment
for purchase of companies
Other, net
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Proceeds from issuance of long-term debt
Repayment of long-term debt
Increase (decrease) in short-term bank loans
Increase in commercial paper
Cash dividends paid
Payment for purchase of treasury stock
Proceeds from treasury stock sold of consolidated subsidiaries
Decrease in other long-term liabilities
Other, net
Net cash provided by financing activities
Effect of exchange rate changes on cash
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents of newly consolidated subsidiaries
at beginning of year
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

(millions of yen)(thousands of
US dollars) (Note 1)

2012

2011

2012

¥3,031¥20,536$37,888(1,552)
14,55041(3,502)
87
6,986(7,274)
(348)
1,045

(5,960)13,158(3,130)(3,348)(44)
4,007(4,096)336
1,015(19,400)
181,875
513(43,775)
1,087
87,325(90,925)(4,350)13,062

(670)

1,469

(8,375)

534
110

124
331

6,675
1,375

—
1,334

1,769
1,189

—
16,675

(919)
(138)
1,052
(1,393)
12,974(19,640)
9,397
2,086
(2,670)16,529(11,488)(1,725)
13,150(17,412)
162,175

2,791

419

34,8883,224(14,580)

11,432(10,391)

40,300(182,250)(1,436)(2,720)(2,265)
1,524(17,950)(34,000)(43,361)(1,779)(57,861)

12,504(1,632)
11,591(542,013)(22,238)(723,263)

49,492(31,734)998
2,000(2,630)(12)
167(1,103)(343)
16,835

7,498(3,014)(4,106)3,000(2,672)
(30)
829
(703)
(99)
703

618,650(396,675)
12,47525,000(32,875)
(150)
2,088
(13,788)(4,287)
210,438(1,223)(29,275)(1,034)27,789(15,288)(365,938)

616
45,563¥16,904

6
17,768¥45,5637,700
569,538$211,300

See Notes to Consolidated Financial Statements.
47

Notes to Consolidated Financial Statements
1. Basis of Presenting Consolidated Financial Statements
The accompanying consolidated financial statements havebeen prepared in accordance with the provisions set forth in
the Japanese Securities and Exchange Law and its related accounting regulations, and in conformity with accounting principles and practices generally accepted in Japan, which are
different in certain respects as to application and disclosure
requirements of International Financial Reporting Standards.
In addition, the accompanying footnotes include information which is not required under generally accepted accounting

principles and practices in Japan but is presented herein as additional information.
The United States dollar ($) amounts included herein are
given solely for convenience and are stated, as a matter of arithmetical computation only, at the rate of ¥80=$1, the approximate exchange rate at March 31, 2012. The translations
should not be construed as representations that the Japanese
yen amounts have been, could have been, or could in the future be, converted into United States dollars.

2. Summary of Significant Accounting Policies(a) Consolidation
The consolidated financial statements include the accounts ofNisshinbo Holdings, Inc. (hereinafter the “Company”) and its
significant subsidiaries (together, the “Group”).
Under the control or influence concept, those companies inwhich the Parent, directly or indirectly, is able to exercise control over operations are fully consolidated, and those companies over which the Group has the ability to exercise significant
influence are accounted for by the equity method.
Investments in unconsolidated subsidiaries and affiliatedcompanies are accounted for by the equity method.
Investments in the remaining unconsolidated subsidiaries
and affiliated companies are stated at cost. If the equity methodof accounting had been applied to the investments in thesecompanies, the effect on the accompanying consolidated financial statements would not be material.
All significant intercompany balances and transactions havebeen eliminated in consolidation. All material unrealized profit
included in assets resulting from transactions within the Groupis eliminated.

(b) Foreign currency transactions
All short-term and long-term monetary receivables and payables denominated in foreign currencies are translated into
Japanese yen at the exchange rates at the balance sheet date.
The foreign exchange gains and losses from translation are recognized in the income statement to the extent that they are nothedged by forward exchange contracts.
Investments in and advances to unconsolidated subsidiaries
and affiliates in foreign currencies are translated at the historical rates effective at the dates of transaction from which suchaccounts were originated.

(c) Foreign currency financial statements
The balance sheet accounts of the consolidated foreign subsidiaries are translated into Japanese yen at the current exchange

48

rate. Revenue and expense accounts of consolidated foreign subsidiaries are translated into yen at the average exchange rate.

(d) Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits
placed with banks on demand and highly liquid investmentswith insignificant risk of changes in value which have maturities
of six months or less when purchased.

(e) Inventories
Inventories are measured principally at the lower of cost and
net realizable value, cost being substantially determined by theactual cost method or the average cost method.

(f) Marketable securities and otherinvestments
The Group classifies all of its marketable securities as availablefor-sale which are reported at fair value, with unrealized
gains and losses included in equity as net unrealized gain on
available-for-sale securities. Other investments without quoted
market prices are stated at cost. Realized gains or losses on thesale of securities are based on the average cost of a particular
security held at the time of sale.
Marketable securities and other investment securities are
regularly reviewed for other-than-temporary declines in carrying amount based on criteria that include the length of time
and the extent to which the market value has been less thancost, the financial condition and near-term prospects of the issuer and the Company’s intent and ability to retain marketablesecurities and investment securities for a period of time sufficient to allow for any anticipated recovery in market value.
When such a decline exists, the Company recognizes an impairment loss to the extent of such decline.

(g) Property, plant and equipment
Property, plant and equipment are stated at cost. Depreciationis computed principally on the straight-line method over theirestimated useful lives. Contribution in aid of purchases of property, plant and equipment from national and local governments are deducted from the acquisition costs of related assets
in accordance with tax regulations.

transactions, but does not cover cash-settled, share-based payment transactions. In addition, the standard allows unlistedcompanies to measure options at their intrinsic value if theycannot reliably estimate fair value.

(l) Research and development costs
Research and development costs are charged to income as
incurred.

(h) Goodwill
The difference between the cost and underlying fair value ofthe net equity of investments in subsidiaries at acquisition is
included in goodwill or other long-term liabilities and amortized on a straight-line basis over five years.
Effective April 1, 2010, the Company changed its accounting method for excess of fair value of acquired net assets overcost to be recognized as other income.

(i) Impairment of long-lived assets
Long-lived assets are evaluated for impairment using an estimate of undiscounted cash flows whenever events or changes
in circumstances indicate that the carrying amount of such
asset may not be recoverable. If the estimate of undiscounted
cash flow is less than the carrying amount of the asset, an impairment loss is recorded based on the fair value of the asset.
Fair value is determined primarily by using the anticipated cash
flows discounted at a rate commensurate with the risk involved.
For assets held for sale, an impairment loss is further increased
by costs to sell. Long-lived assets to be disposed of other thanby sale are considered held and used until disposed of.

(j) Retirement and pension plans
The Group has defined benefit plans and defined contributionplans that cover substantially all employees. Under the defined
benefit plans for the Group, the annual provision for retirement
benefits is calculated to state the liability for retirement benefits based on the projected benefit obligations and plan assets
at the balance sheet date.
Retirement benefits to directors and corporate auditors areprovided at the amount that would be required if all directors
and corporate auditors retired at the balance sheet date.

(k) Stock options
The accounting standard for stock options requires companies
to recognize compensation expense for employee stock options based on the fair value at the date of grant and over thevesting period as consideration for receiving goods or services.
The standard also requires companies to account for stock options granted to non-employees based on the fair value of either the stock option or the goods or services received. In thebalance sheet, the stock option is presented as a stock acquisition right as a separate component of equity until exercised.
The standard covers equity-settled, share-based payment(m) Income taxes
The provision for income taxes is computed based on the pretax income included in the consolidated statements of income.
The asset and liability approach is used to recognize deferred
tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying
amounts and the tax bases of assets and liabilities. Deferredtaxes are measured by applying currently enacted tax laws to
the temporary differences.

(n) Derivative financial instruments
The Group uses a variety of derivative financial instruments,
including foreign currency forward contracts, currency swaps,
coupon swaps, currency options and interest rate swaps, as ameans of hedging exposure to foreign currency and interest
rate risks. The Group does not enter into derivatives for tradingor speculative purposes.
The foreign currency forward contracts, coupon swaps andcurrency options are utilized to hedge foreign currency exposures in sales of finished products to overseas customers andprocurement of raw materials from overseas suppliers. Trade
receivables and payables denominated in foreign currencies aretranslated at the contracted rates if the contracts qualify forhedge accounting.
Interest rate swaps are utilized to hedge the interest rate
exposures of long-term debt.

(o) Asset retirement obligations
The asset retirement obligation is defined as a legal obligation imposed either by law or contract that results from theacquisition, construction, development and the normal operation of such tangible fixed assets under the Japanese accounting standard.
The asset retirement obligation is recognized as the sum of
the discounted cash flows required for the future asset retirement and is recorded in the period in which the obligation isincurred if a reasonable estimate can be made.
The asset retirement cost is allocated to expense throughdepreciation over the remaining useful life of the assets.

49

3. Inventories

Annual maturities of long-term debt were as follows:

Inventories at March 31, 2012 and 2011 were as follows:(millions of yen)(thousands of US dollars)Year ending March 31,(millions of yen)(thousands of US dollars)

2013¥20,625$257,812

2012

2011

2012

2014

23,255

290,688

Finished products¥30,323¥24,510$379,038

2015

17,619220,237

Work in process

33,73934,732421,738

2016

5,405

67,563

Materials and supplies

17,541

15,286219,2622017 and thereafter¥81,603¥74,528$1,020,038

4. Marketable and Investment Securities(millions of yen)

2012

2011

2012

¥14,044¥9,931$175,550

Property, plant and equipment

20,83815,376

260,475

Notes and accounts receivable, trade

12,695

4,052

158,688

338

452

4,225

1,479

—

18,487

664

—

8,300

¥50,058¥29,811$625,725(thousands of US dollars)

2012

2011

2012

Cost

¥29,008¥31,667$362,600

Unrealized gains

27,59727,543344,963

Investment securities

Unrealized losses(2,712)(3,474)(33,900)¥53,893¥55,736$673,663

Time deposits
Other current assets

Aggregate cost of non-marketable securities accounted for under the cost method totaled ¥2,976 million ($37,200 thousand) and¥2,333 million at March 31, 2012 and 2011, respectively.

At March 31, 2012 and 2011, in addition, pledged assets as collateral for liabilities other than the above were as follows:

5. Short-Term Bank Loans and Long-Term Debt
The annual interest rates applicable to the short-term bank loans at March 31, 2012 and 2011 were 0.5% to 8.2%. Long-term debt
at March 31, 2012 and 2011 consisted of the following:

2012(millions of yen)(thousands of US dollars)

2011

2012

Long-term debt with collateral:
Loans from banks maturing serially to 2025, ranging from 0.7% to 3.8%

¥14,958¥17,715$186,975

10.8% bonds due in 201716,113—

201,413

Investment securities
Time deposits

Long-term debt without collateral:

Less current portion50(millions of yen)(thousands of US dollars)

2012

2011

2012

¥7,605¥7,965$95,063

450

369

5,625

Assets pledged:
Property, plant and equipment

Capital lease obligations, due through 2018

(thousands of US dollars)

Inventories(millions of yen)

Loans from banks maturing serially to 2019, ranging from 0.6% to 3.8%

199,000$1,035,300

At March 31, 2012 and 2011, net book value of assets pledged as collateral for short-term bank loans and long-term debt wereas follows:

The carrying amounts and aggregate fair values of securities available-for-sale included in marketable and investment securities at
March 31, 2012 and 2011 were as follows:

Fair value

15,920¥82,824—1—¥8,055¥8,335$100,688(millions of yen)(thousands of US dollars)

2012

2011

2012

¥8,596¥8,596$107,450

50,86230,420635,775891

707

11,137

82,824

48,842

1,035,300

Notes and accounts payable, trade

311

292

3,888

(20,625)(23,854)(257,812)

Other current liabilities

—

564

—

¥62,199¥24,988$777,488¥8,907¥9,452$111,338

Liabilities with collateral:
Other long-term liabilities516. Retirement and Pension Plans
Under most circumstances, employees terminating their employment are entitled to retirement benefits determined basedon the rate of pay at termination, years of service and certain
other factors.
The Group provides defined benefit plans and defined contribution plans. In addition, the Company and certain subsidiaries
have established employee retirement benefit trusts.

7. Income Taxes
The liability for retirement benefits for directors and corporate auditors at March 31, 2012 and 2011 were ¥333 million($4,162 thousand) and ¥303 million. The retirement benefits
for directors and corporate auditors are paid subject to the approval of the shareholders.

(millions of yen)(thousands of US dollars)

2012

2011

2012

Loss on devaluation of inventories¥2,589¥2,837$32,363

Tax loss carryforwards

25,42914,992

317,863

Deferred tax assets:

The liability for employees’ retirement benefits at March 31, 2012 and 2011 consisted of the following:

2012(millions of yen)(thousands of US dollars)

2011

2012

Allowance for doubtful accounts

1,084

923

13,550Accrued employees’ bonuses

2,145

2,386

26,813

Accrued severance benefits

10,955

15,861

136,938

Impairment of long-lived assets and depreciation in excess of tax limitation

1,045

855

13,062877

3,462

10,962

2,343

2,817

29,288

Projected benefit obligation¥98,258¥89,753$1,228,225

Fair value of plan assets(51,746)(44,648)(646,825)

Devaluation of investment securities

Unrecognized prior service cost
Unrecognized actuarial loss
Prepaid pension cost

46,51245,105

581,400

Software costs

1,520

1,777

19,000Other
Less valuation allowance(7,847)(9,040)(98,087)

40,18537,842502,313

2,824

3,638

35,300¥43,009¥41,480$537,613

The components of net periodic employees’ retirement benefit costs for the years ended March 31, 2012 and 2011 were as follows:2012(millions of yen)(thousands of US dollars)

2011

2012

Defined benefits plans:Service cost

¥3,992¥2,668$49,900

Interest cost

1,782

1,105

22,275

Expected return on plan assets

(574)

(424)

(7,175)

Amortization of prior service cost

(258)

(228)

(3,225)

Recognized actuarial loss

1,094

850

13,675

—

40

—

6,036

4,011

75,450

Amortization of transitional obligation
Net periodic benefit costs
Defined contribution plan:
Defined contribution pension cost
Total

628

474

7,850

¥6,664¥4,485$83,300

Assumptions used for the years ended March 31, 2012 and 2011 were set forth as follows:

2012

2011

Discount rate

1.3%–2.0%

2.0%

Expected rate of return on plan assets

0.0%–6.0%

0.0%–2.9%

Amortization period of prior service cost

10–15 years

10–15 years

Recognition period of actuarial gain / loss

10–15 years

10–15 years

10 years

10 years

Amortization period of transitional obligation

4,311

4,754

53,887(35,323)(37,382)(441,538)¥15,455¥11,505$193,188

Unrealized gain on available-for-sale securities¥(9,107)¥(10,613)$(113,838)

Deferred gains on sale of property(4,114)(4,377)(51,425)

Land revaluation surplus(10,815)(12,583)(135,188)

Intangible assets recognized in business combination(5,339)—(66,737)

Deferred tax liabilities:

Other

Net deferred tax(2,988)(2,527)(37,350)¥(32,363)¥(30,100)$(404,538)¥(16,908)¥(18,595)$(211,350)

A reconciliation between the normal effective statutory tax rate for the years ended March 31, 2012 and 2011 and the actual effective
tax rates reflected in the accompanying consolidated statements of income was as follows:

Normal effective statutory tax rate

Retirement benefits paid due to restructuring of business operations for the years ended March 31, 2012 and 2011 were ¥4,583
million ($57,288 thousand) and ¥1,366 million, respectively.

52

The tax effects of significant temporary differences and loss carry-forwards which resulted in deferred tax assets and liabilities at
March 31, 2012 and 2011 were as follows:

2012

2011

40.7%

40.7%

(189.8)(4.9)

Equity in earnings of affiliates

(0.5)

(6.6)

Cash dividends and other permanent differences(18.4)(3.7)

Lower income tax rates applicable to income in certain foreign countries(11.6)(1.8)

Net changes in valuation allowance

Amortization of goodwill

2.8

(5.7)

Loss on investment securities in affiliates sold

—

11.3

Effects of revised tax rate

54.5

—

Other

12.8

5.2

(109.5)%

34.5%

Actual effective tax rate

As a result of changes in the corporate tax rate, the deferred tax assets using enacted tax rates in effect for the years in which
differences are expected to reverse at 38.0% for the three years ending March 31, 2013 to 2015 and 35.6% for the years ending
March 31, 2016 and thereafter.

53

8. Leases

10. Other Income (Expenses) — Other, Net

The Group leases certain machinery, computer equipment andother assets.
Total rental expenses for the years ended March 31, 2012
and 2011 were ¥423 million ($5,288 thousand) and ¥408 million, respectively, including ¥277 million ($3,463 thousand)and ¥254 million of lease payments under finance leases.

Pro forma information of leased property such as acquisition cost, accumulated depreciation, accumulated impairment
loss, obligation under finance leases, and depreciation expenseof finance leases that do not transfer ownership of the leased
property to the lessee on an “as if capitalized” basis for theyears ended March 31, 2012 and 2011 was as follows:

Acquisition cost
Accumulated depreciation(millions of yen)(thousands of US dollars)

2012

2011

2012

¥1,069¥2,036$13,363(918)(1,635)(11,475)

(13)

(15)

(163)

¥138

¥386

$1,725

Accumulated impairment loss
Net leased property(millions of yen)(thousands of US dollars)

2012

2011

2012

Due within one year

¥88

¥248

$1,100Due after one year

50

138

625

¥138

¥386

$1,725(millions of yen)(thousands of US dollars)

2012

2011

2012

Gain (loss) on sale of property, plant and equipment¥348¥(336)$4,350

Impairment of long-lived assets(1,045)(1,015)(13,062)

Gain (loss) on sale of securities

670(1,469)

8,375

(534)

(124)

(6,675)(4,583)(1,366)(57,288)

Amortization of goodwill

400

3,487

5,000

Loss due to increase in the Company’s share of the affiliate accounted forby the equity method—(1,769)—

Write-down of investment securities
Retirement benefits paid due to restructuring of business operations

Other, net

(686)

(988)

(8,575)¥(5,430)¥(3,580)$(67,875)

11. Commitments and Contingencies

Obligations under finance leases:

Total(millions of yen)(thousands of US dollars)

2012

2011

2012

¥272

¥251

$3,400Depreciation expense under finance leases:
Depreciation expense

Depreciation expense, which is not reflected in the accompanying statements of income, is computed by the straight-line method.

9. Derivatives
The Group enters into foreign currency forward contracts andcurrency swap contracts to hedge exchange risk associatedwith certain assets and liabilities denominated in foreign currencies and also into interest rate swap contracts to manage its

Commitments for capital expenditures outstanding at March 31, 2012 and 2011 were in the approximate amounts of ¥2,495 million($31,188 thousand) and ¥2,155 million, respectively.

12. Subsequent Events(a) Year-end cash dividends(b) Stock option

On May 10, 2012, the Board of Directors of Nisshinbo Holdings
Inc. declared year-end cash dividends (¥7.5 per share) in theamounts of ¥1,310 million ($16,375 thousand).

At the general shareholders meeting held on June 28, 2012,
the Company’s shareholders approved a stock option plan togrant stock purchase rights up to 200 thousand shares of theCompany’s common stock to directors and key employees in
the period from August 1, 2014 to July 31, 2019.

interest rate exposures on certain liabilities. Such contracts outstanding at March 31, 2012 and 2011 were as follows, however
the contracts which qualify for hedge accounting are excluded
from following disclosure of market value information.
(millions of yen)

2012

(thousands of US dollars)

2012

2011

Contract
amountFair value

Unrealized
loss

Contract
amountFair value

Unrealized
gain (loss)

Contract
amountFair value

Unrealized
loss

¥389

¥(20)

¥(20)

¥407

¥(18)

¥(18)

$4,863$(250)$(250)¥1,563¥(57)¥(57) ¥1,667¥(24)¥(24) $19,538$(713)$(713)

—

—

—

—

—

Receive EUR · Pay JP¥¥2,182

Receive EUR · Pay US$¥1,044

Not hedged:

Other income (expenses) — Other, net consisted of the following:

Interest rate swaps:
Fixed rate payments, floating rate receipt
Foreign currency forward contracts:
Sold
Purchased

—

¥280

¥3

¥3

¥(272)¥(272) ¥2,629¥(350)¥(350) $27,275 $(3,400) $(3,400)

¥(32)

¥(32)

¥(10)

¥(10) $13,050

Currency swap:

54

¥559

$(400)$(400)

55

Independent Auditors’ Report
13. Segment Information
Information about industry segments of the Company and its consolidated subsidiaries for the years ended March 31, 2012 and 2011
was as follows:(millions of yen)

2012
TextilesAutomobile
BrakesPapersPrecision
Instruments

ChemicalsElectronics

Real Estate

Other Eliminations/
Businesses
Corporate

Consolidated

I. Sales and Operating Income (Loss)

To the Board of Directors of Nisshinbo Holdings Inc.

We have audited the consolidated balance sheets of Nisshinbo Holdings Inc. and consolidated
subsidiaries as of March 31, 2012 and 2011, and the related consolidated statements of income,consolidated statements of comprehensive income, changes in equity, and cash flows for the year thenSales to customers¥60,964¥47,450¥30,220¥25,191¥8,258¥169,907¥9,082¥28,268¥—¥379,340

Intersegment sales

14

259

754

853

548

135

2,643

2,004

(7,210)—ended, all expressed in Japanese yen. These consolidated financial statements are the responsibility of

60,97847,70930,974

26,0448,806

170,042

11,72530,272(7,210)379,340

60,13843,45530,714

27,114

8,432

174,153

4,982

29,621(3,439)375,170

the Company’s management. Our responsibility is to express an opinion on these consolidated financial¥840¥4,254¥260¥(1,070)¥374¥(4,111)¥6,743¥651¥(3,771)¥4,170		Total sales
Operating expenses
Operating income (loss)

We conducted our audits in accordance with auditing standards generally accepted and applied in

II. Total Assets, Depreciation and Amortization, Impairment of Long-lived Assets and Capital Expenditures
Total assets¥47,657 ¥128,418¥21,798¥24,089¥8,640¥188,515¥50,395¥22,190¥42,882¥534,584

Depreciation and amortization¥1,060¥2,669¥1,102¥1,104¥711¥5,387¥1,826¥109¥582¥14,550

Impairment of long-lived assets

¥—

¥—

¥—

¥219

¥—

¥826

¥—

¥—

¥—

¥1,045¥1,992¥2,933¥765¥2,480¥426¥5,432¥522¥101¥1,054¥15,705

Capital expenditures(millions of yen)

2011
TextilesAutomobile
BrakesPapersPrecision
Instruments

ChemicalsElectronics

Real Estate

Other Eliminations/
Businesses
Corporate

Consolidated

I. Sales and Operating Income (Loss)¥57,400¥46,119¥30,326¥32,020¥7,284¥112,820¥12,437¥27,149¥—¥325,555

Intersegment sales

23

346

908

701

533

149

3,477

1,442

(7,579)—57,423

46,46531,23432,721

7,817

112,969

15,91428,591(7,579)325,555

57,23941,37531,381

31,3078,112

106,785

5,723

28,168(4,378)305,712¥184¥5,090¥(147)¥1,414¥(295)¥6,184¥10,191¥423¥(3,201)¥19,843

Operating expenses
Operating income (loss)

about whether the consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall consolidated financial statement

In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the financial position of Nisshinbo Holdings Inc. and consolidated subsidiaries as of March 31,
2012 and 2011, and the results of their operations and their cash flows for the year then ended, inconformity with accounting principles and practices generally accepted in Japan.

II. Total Assets, Depreciation and Amortization, Impairment of Long-lived Assets and Capital Expenditures
Total assets¥49,324¥40,637¥22,785¥23,956¥7,843¥222,476¥52,029¥21,722¥39,080¥479,852

Depreciation and amortization¥1,242¥2,486¥1,047¥1,149¥719¥4,050¥1,852¥122¥491¥13,158

Impairment of long-lived assets

¥954

¥—

¥—

¥—

¥—

¥61

¥—

¥—

¥—

¥1,015¥1,837¥2,625¥1,457¥1,114¥111¥4,043

¥814

¥82

¥717

¥12,800

Capital expenditures

Japan. Those standards require that we plan and perform the audit to obtain reasonable assurance

presentation. We believe that our audits provide a reasonable basis for our opinion.

Sales to customers
		Total sales

statements based on our audits.

(thousands of US dollars)

The United States dollar amounts shown in the consolidated financial statements have been translated
solely for convenience. We have reviewed this translation and, in our opinion, the consolidated financial
statements expressed in Japanese yen have been translated into US dollars on the basis described in
Note 1.

2012
TextilesAutomobile
BrakesPapersPrecision
Instruments

ChemicalsElectronics

Real Estate

Other Eliminations/
Businesses
Corporate$103,225 $2,123,837

Consolidated

I. Sales and Operating Income (Loss)
Sales to customers$762,050$593,125$377,750$314,888$113,525$353,350

Intersegment sales

175

3,238

9,425

10,662

6,850

1,688

33,03725,050(90,125)—762,225596,363

387,175

325,550

110,075

2,125,525

146,562

378,400(90,125)

4,741,750

Operating expenses

751,725

543,188383,925

338,925

105,400

2,176,913

62,275370,262(42,988)4,689,625

Operating income (loss)$10,500$53,175$3,250$(13,375)$4,675$(51,388)$84,287$8,138$(47,137)$52,125

Total sales$— $4,741,750

Total assets$595,712 $1,605,225$272,475$301,112$629,938$277,375

Depreciation and amortization$13,250$33,362$13,775$13,800$8,887$67,338$22,825$1,363$7,275

Impairment of long-lived assets

$—

$—

$—

$2,737$—$10,325

$—

$—

$—

$13,062$24,900$36,662$9,563$31,000$5,325$67,900$6,525$1,263$13,175$196,313

Capital expenditures

56

June 28, 2012
Tokyo, Japan

II. Total Assets, Depreciation and Amortization, Impairment of Long-lived Assets and Capital Expenditures$108,000 $2,356,438

VERITAS & Co.

$536,025 $6,682,300$181,875

57

History
1907

Established Nisshin Cotton Spinning Co., Ltd.

1938

Merged with Nisshin Rayon Co., Ltd. (now the Miai Plant)

1940

Established Toa Jitsugyo Co., Ltd. (name changed to Nisshin Toa Inc. in 1990)

1945

Acquired Meiji Plant, Nanshin Seiki Co., Ltd. (now the Fuji Plant)

1949

Established Nihon Postal Franker Co., Ltd. (name changed to Nisshinbo Postal Chemical Co., Ltd. in 2006)

1958

Established Nippon Kohbunshikan Co., Ltd. (name changed to Nippon Kohbunshi Co., Ltd. in 1986)(acquired by Nisshinbo Mechatronics Inc. in 2010)

1962

English name of company changed to Nisshin Spinning Co., Ltd.

1972

Established Nisshinbo Do Brasil Industria Textil LTDA. (Brazil)

1978

Acquired Tokai Seishi Kougyou Co., Ltd.

1985

Acquired Nisshin Denim Inc.

1989

Established Kohbunshi (Thailand) Ltd. (Thailand)

1993

Established Pudong Kohbunshi (Shanghai) Co., Ltd. (China)(name changed to Nisshinbo Mechatronics (Shanghai) Co., Ltd. in 2010)

1995

Established Nisshinbo Automotive Corporation (U.S.A.)
Established Nisshinbo Urban Development Co., Ltd.

1996

Established Nisshinbo Somboon Automotive Co., Ltd. (Thailand)

1997

Established Nisshinbo Automotive Manufacturing Inc. (U.S.A.)

1998

Established P.T. Gistex Nisshinbo Indonesia (Indonesia)

1999

Established Saeron Automotive Corporation (South Korea)

2000

Purchased additional shares of P.T. Nikawa Textile Industry (Indonesia)

Corporate Data
(As of March 31, 2012)

Common Stock

FoundedFeb. 5, 1907

Authorized
IssuedHead Office
2-31-11, Ningyo-cho, Nihonbashi, Chuo-ku,
Tokyo 103-8650, Japan

Shareholders
13,413

Tel: +81-3-5695-8833
Fax: +81-3-5695-8970

Composition of shareholders

Osaka Branch

Securities
firms

2-4-2, Kitakyuhouji-machi, Chuo-ku,
Osaka 541-0057, Japan

2.3%
Japanese financial
institutions

37.9%

Japanese
individuals andothersNagoya Branch

15.5%

5-2-38, Sakae, Naka-ku,
Nagoya 460-0008, Japan
Tel: +81-52-261-6151
Fax: +81-52-263-9480

Employees
236
22,06822,304

Other Japaneseinstitutions

Foreigninstitutions

18.0%

21.0%

Listings
Tokyo, Osaka, Nagoya, Fukuoka and Sapporo

Established Continental Teves Co., Ltd. through merger with Continental Teves AG & Co. oHG(name changed to Continental Automotive Co., Ltd. in 2007)
2002

Treasury stock

5.3%

Tel: +81-6-6267-5501
Fax: +81-6-6267-5529

Parent Company
Subsidiaries
Total

371,755,000 shares
178,798,939 shares¥27,588 million—US$345 million

Transfer Agent

Acquired all shares of Iwao & Co., Ltd.

Mitsubishi UFJ Trust and Banking Corporation

Established Nisshinbo (Shanghai) Co., Ltd. (China)

1-4-5, Marunouchi, Chiyoda-ku,

2003

Established Saeron Automotive Beijing Corporation (China)

Tokyo 100-8212, Japan2004

Established Continental Teves Corporation (Lian Yun Gang) (China)

2005

Made tender offer for additional shares of New Japan Radio Co., Ltd.

2006

Acquired additional shares of Japan Radio Co., Ltd. and Nagano Japan Radio Co., Ltd.

2007

Acquired all shares of Daiwa Shiko Co., Ltd.

2008

Acquired all shares of CHOYA CORP.
Acquired all shares of Nisshinbo Brake Sales Co., Ltd. (acquired by Nisshinbo Brake Inc. in 2010)

Stock Price and Trading Volume(yen)(million shares)

1,500

60
50

2009

Spun off five businesses — Textiles, Automobile Brakes, Papers, Mechatronics, and Chemicals — andconverted to holding company; corporate name changed to Nisshinbo Holdings Inc.

1,250

2010

Established Nisshinbo-Yawei Precision Instruments & Machinery (Jiangsu) Co., Ltd. (China)(formerly Jiangsu Yawei Nisshinbo Precision Instruments & Machinery Co., Ltd.)

1,000

Acquired additional shares in Japan Radio Co., Ltd., making it a consolidated subsidiary
Nagano Japan Radio Co., Ltd. also becomes a consolidated subsidiary as a result

750

Established Nisshinbo Saeron (Changshu) Automotive Co., Ltd. (China)

500

2011

40

Stock price (left)

30

Trading volume (right)

20

Established Nisshinbo Singapore Pte. Ltd. (Singapore)
Acquired all shares of TMD Friction Group S.A. (Luxembourg)
2012

Established Nisshinbo Business Management (Shanghai) Co., Ltd. (China)

250

10

0

0
9/09

58

12/09

3/10

6/10

9/10

12/10

3/11

6/11

9/11

12/11

3/12

6/12

59